Bankruptcy filings rising faster than exoected

[keepmine]

April 2, 2009

Bankruptcy Filings Rising Faster Than Expected

In March 2009, data from Automated Access to Court Electronic Records (AACER) report there were almost 131,000 total U.S. bankruptcy filings for a rate of 5,945 filings per business day. That is a 9.2% increase from February and a year-over-year increase of 38.1%. It also is a 17.0% increase from November 2008, just before the annual dip in filings during December and January.

Anyway you look at it, bankruptcy filings are rising dramatically. The 9% growth in March may not sound like much, but it is an annualized growth of 280%, meaning annual filings would almost triple if they grew 9% each month. The rate of increase also seems to be rising. It took us thirteen months to go from 3,000 filings per day to 4,000 and another nine months to go from 4,000 filings per day to 5,000. In March, we almost broke the 6,000 filings per day figure. If we go over 6,000 filings per day in April, as we appear poised to do, it will have taken only six months to break that new plateau.


With the March data, that gives us one calendar quarter of 2009 filings, and I am comfortable to start making some projections for the entire calendar year. In 2009, we will have:

1,326,000 filings if bankruptcy filings continue for the rest of the year at the same daily rate (5,303 per day) as they have averaged for the first three months of 2009
1,447,000 filings if bankruptcy filings continue at the same daily rate (5,9455 per day) as they have averaged for March

1,476,000 filings if bankruptcy filings for the remaining nine months of 2009 constitute the same proportion of total filings as the last nine months of 200 constituted for total filings that year (about 78.1%)
Those figures would represent a 22% - 32% increase in bankruptcy filings this year. My prediction of 1.4 million filings in 2009 is starting to look a little low. Indeed, if the rate of increase keeps rising, we could see 1.5 million filings, although I think a figure of 1.45 million is more likely. Of course, if the bankruptcy mortgage modification legislation passes, then filings will be much higher (easily more than 1.6 million).

The March 2009 figures have returned us almost to the level before the 2005 law became effective. When I said that the last time, a reader questioned the accuracy of the statement. The graph to the right shows the filing rate per day since 2004 (as far back as I have data). The thin red line is provided as a visual reference to compare the current filing rate to past filing rates. The spike off the top of the chart is for a data point of 31,520 filings per day in October 2005, when people rushed to file to beat the effective date of the onerous 2005 bankruptcy law.

Source:
Creditslips.org
Posted by Bob Lawless in Bankruptcy Data

http://www.creditslips.org/creditslips/2009/04/my-entry.html

[jencz]

This confirms what we all have suspected. Hopefully banks and employers will find ways to work with folks with bankruptcy on their credit reports.

One can hope anyway!

[optimistic1]

Almost like the banks knew this would happen, which is why all that legislation was passed in 2005, making it harder for people to get out from mountains of debt.

[samson420]

Almost like the banks knew this would happen, which is why all that legislation was passed in 2005, making it harder for people to get out from mountains of debt.

That is exactly the way it looks to me. It is like they knew what was comming.

Maybe not to the full extent, but they knew more then should have.

[Flamingo]

Unfortunately, when you look at this another way, it shows just how much people have burdened themselves with huge piles of debt during the easy credit years and when the job loss hit, the cut in hours or the debt burden was just too great, this is the result. Thankfully bankruptcy is there as a ticket out but then there is a certain percentage of those that will just go right back to the old ways no matter how difficult it is to file BK and end up filing again in several years. Time and Newsweek both over the past few weeks have discussed how the ride is over for the consumer and how everyone is going to learn to live within their means after the disaster of this economy. Everyone just can't blame the credit card companies; we all need to look at ourselves too. After going through Bk as we did seven years ago this month, we now look at credit as a necessity when needed and not as free money to buy a pair of shoes in 9 different colors. Recent filers may not yet view things in the light we now view things and try to blame everyone else for the situation, but it all comes down to how we personally handle our lives and how we personally view credit.

[2Bshinyandnew]

Unfortunately, when you look at this another way, it shows just how much people have burdened themselves with huge piles of debt during the easy credit years and when the job loss hit, the cut in hours or the debt burden was just too great, this is the result. Thankfully bankruptcy is there as a ticket out but then there is a certain percentage of those that will just go right back to the old ways no matter how difficult it is to file BK and end up filing again in several years. Time and Newsweek both over the past few weeks have discussed how the ride is over for the consumer and how everyone is going to learn to live within their means after the disaster of this economy. Everyone just can't blame the credit card companies; we all need to look at ourselves too. After going through Bk as we did seven years ago this month, we now look at credit as a necessity when needed and not as free money to buy a pair of shoes in 9 different colors. Recent filers may not yet view things in the light we now view things and try to blame everyone else for the situation, but it all comes down to how we personally handle our lives and how we personally view credit.

Who constitutes the "we" you are referring to above? (bold)

You sound like a quasi Stockholm Syndrome victim. As long as you keep trying to convince yourself and others to accept 100% of the blame:

but it all comes down to how we personally handle our lives and how we personally view credit.

you keep perpetuating exactly what the huge earners at the top of the banking hierarchy want you to, and you are part of the problem, not the solution. The % of people filing BK today due to irresponsible spending is extremely small. If we don't call the banks and CC companies out, if we keep telling ourselves that it was our fault that we got here because we were living above our means when in fact it is a very small % of filers that fall under that category, the problem will continue.

The credit card companies lobbied for the 2005 bankruptcy law changes so effectively that, they got the changes they wanted AND brainwashed many people into thinking the changes were necessary to begin with. The problem was never that Bankruptcy was too easy or people lived above their means, the problem included the psychological rape by the credit card companies and lenders by convincing consumers using intense, proven and subversive psychological means to use credit so they, the lenders could make more money. Money isn't created by how much gold is in the federal reserve, it is created by debt! A simple explanation of Monetary Theory will back that up.

The 2005 Bankruptcy changes have done nothing except line the pockets of credit counseling services.

The economy is about to IMPLODE, and you are sitting there piously stating that "it all comes down to how we personally handle our lives and how we personally view credit".

[Flamingo]

Who constitutes the "we" you are referring to above? (bold)
You sound like a quasi Stockholm Syndrome victim. As long as you keep trying to convince yourself and others to accept 100% of the blame:
you keep perpetuating exactly what the huge earners at the top of the banking hierarchy want you to, and you are part of the problem, not the solution. The % of people filing BK today due to irresponsible spending is extremely small. If we don't call the banks and CC companies out, if we keep telling ourselves that it was our fault that we got here because we were living above our means when in fact it is a very small % of filers that fall under that category, the problem will continue.
The credit card companies lobbied for the 2005 bankruptcy law changes so effectively that, they got the changes they wanted AND brainwashed many people into thinking the changes were necessary to begin with. The problem was never that Bankruptcy was too easy or people lived above their means, the problem included the psychological rape by the credit card companies and lenders by convincing consumers using intense, proven and subversive psychological means to use credit so they, the lenders could make more money. Money isn't created by how much gold is in the federal reserve, it is created by debt! A simple explanation of Monetary Theory will back that up.
The 2005 Bankruptcy changes have done nothing except line the pockets of credit counseling services.
The economy is about to IMPLODE, and you are sitting there piously stating that "it all comes down to how we personally handle our lives and how we personally view credit".

Don't fret - "we" refers to my spouse and me. Get ahold of the past two weeks of Time and Newsweek and maybe you can write a Letter to the Editor of each stating the above also. Two sided views are always fabulous to any situation and that is why I posted my thoughts, and when one is several years beyond filing and discharge, life and circumstances take on various different outlooks than before and one looks back and wishes one could have done things differently. That does not mean you are a "quasi Stockholm Syndrome victim." LOL! Our debt was our fault, not the credit card companies, not my neighbors', not my relatives. If we did not have the debt when the job was lost, we would not have had to file. Most folks cannot get beyond that at first due to denial and other reasons, or they had to file for other reasons such as overwhelming medical debt after a major medical event. In fact many people get defensive and blame it on everything else but. I am not stating that the credit card/mortgage companies are not at fault at providing easy credit for anyone and everyone but the US consumer has gone through a state of easy money and easy credit whether or not they could actually afford it and what you are seeing now are the ramifications of that. Not only is it credit card company/mortgage company greed, it is also consumer greed. There are many articles out there now on the internet and in major publications stating what has occurred with this economy is a fabulous lesson for everyone to learn to live within their means.

As to your last paragraph, just think how things would be if we all did things differently when it came to credit cards, obtaining mortgages, etc. and we handled that and our personal lives responsibly knowing that we could afford the credit and the mortgage when the rates went up or if we possibly lost the job or the income stopped in the future. Again, when one is several years beyond BK and all the denial and blaming is gone, the articles by Time and Newsweek make a ton of sense as to this economy being a great teaching tool for people to start living within their means.

Many people have posted on here during the past several years how they went crazy with credit and then there are those that have not (i.e., medical, divorce, etc.) and that doesn't make me part of the problem of any of this as you state above. I am going by experience from real life situations and recent articles on the economy. In fact our filing Chapter 13 BK back in 2002 probably had us prepared better than most to ride out this economy as we have very low or no credit card debt and only mortgage debt now and have learned to keep things in check so if we experience a job loss, we can ride it out. There is no better budget/financial life teacher in the world than going through a Chapter 13.

[shabam]

Unfortunately, when you look at this another way, it shows just how much people have burdened themselves with huge piles of debt during the easy credit years and when the job loss hit, the cut in hours or the debt burden was just too great, this is the result. Thankfully bankruptcy is there as a ticket out but then there is a certain percentage of those that will just go right back to the old ways no matter how difficult it is to file BK and end up filing again in several years. Time and Newsweek both over the past few weeks have discussed how the ride is over for the consumer and how everyone is going to learn to live within their means after the disaster of this economy. Everyone just can't blame the credit card companies; we all need to look at ourselves too. After going through Bk as we did seven years ago this month, we now look at credit as a necessity when needed and not as free money to buy a pair of shoes in 9 different colors. Recent filers may not yet view things in the light we now view things and try to blame everyone else for the situation, but it all comes down to how we personally handle our lives and how we personally view credit.

You're right. I was earning over $100k at one stage. The banks just kept on increasing my limits and approving new credit lines to the point that I had over $300k in credit available. Yes you can use the old cliche equivalent of guns don't kill people, people do but they knew what they are doing. You are talking about billion dollar businesses here whose business is money. They have statistical models as well as gurus who can figure out the chance someone will default. As well as a range of what if scenarios regarding the customer. Instead they use CC contracts that even a Harvard law professors does not understand. Instead of being responsible they are busy figuring out new ways to stick it to you. In my case, I should never have been allowed to accumulate over $20K in debt. Ideally $10k. They use a range of tactics to suck you in. The same way a drug dealer pushes their drugs. But you seem to say well the user is just as responsible as the pusher. No they are not.

But you know what angers me the most, is that during the BK process they are never held accountable or asked to explain their actions. The bk system actually has a trustee who is looking out for them. A court that is supposed to represent we the people. We have laws that protect them and provide them with the power to go after you. As my lawyer said, who is a trustee, they are an evil bunch and of they want to get you they will find something or some way to get you to have to pay.

Whereas the way bankruptcy should work is that when it comes to cc (unsecured debt), they took the risk so they get zero if you file. Therefore, next time they should think wisely about how much and to whom they hand out credit. It should not just be the user on the stand explaining themselves, as is the status quo.

[keepmine]

Well, as the article points out with bk filings on track with pre reform numbers, the entire legislation was an execrise in futility. The ole "circular firing squad".
At the end of the day, there is one thing you can't legislate. In any credit transaction, there is risk to the lender and risk to the borrower and sometimes, the risk is realized by both parties.
One thing I think you'll see as {if} the economy recovers is much lower credit card limits for everyone. I just don't see lenders issuing massive credit lines to people that already have a lot of existing credit.
And, that won't be a bad thing.

[shabam]

Well, as the article points out with bk filings on track with pre reform numbers, the entire legislation was an execrise in futility. The ole "circular firing squad".
At the end of the day, there is one thing you can't legislate. In any credit transaction, there is risk to the lender and risk to the borrower and sometimes, the risk is realized by both parties.
One thing I think you'll see as {if} the economy recovers is much lower credit card limits for everyone. I just don't see lenders issuing massive credit lines to people that already have a lot of existing credit.
And, that won't be a bad thing.

and they should be lower. I think by default nobody should have a credit limit higher than 2 months worth of disposable income. Any higher should require a solid income and or collateral. I remember I used to see my credit limits, like it was some sort of badge of honor. Now that is just crazy talk. When I look at some of the cards I don't owe anything on, I laugh at the limit.

Personally I am not blaming the banks but responsibility is a two way street. Many of our banks have failed us. To get a CC in the UK I needed to provide detailed info on my job, employer, living arrangements, assets, liabilities, expenses. Some banks also requested a copy of my last two pay stubs.

Whereas here you get "Pre-Approved!", with form to return that just asks for your ssn and household income. Then the second you cannot pay it, accuse you of defrauding them and chase you through the courts.

I would like to see our congress or our courts say he you offered them the unsecured debt, hence the term unsecured debt. Therefore, you have no recourse if they cannot pay. Or even some sort of statue of limitation. If a bank offers you credit over x percent of your salary, then they should not be able to pursue the individual if they cannot pay. Make it a rule for anyone earning under $40K or something. If we had that sort of regulation, most of us probably would not be in this mess in the first place. and our nation would not be in a credit crisis on the verge of bankruptcy itself

[shabam]

I would not be surprised if one day we see someone registered with the name of USA asking what the country needs to do to file for a chapter 7. lol

We have some real gurus on this board. Gurus who between them probably have more financial knowledge (and common sense) than half the house of rep and congress, combined.

[banca rotta]

I used to take the side of Flamingo and still do to a point but as 2bshinyandnew points out I'm beginning to think like a lot of you cynics out there and realize the bankers do run the country and do bare a great deal of responsibility of all the current problems.

They simply create debt so they can create more debt and so on. Taxpayers pay the interest to the fed on all the money congress borrows and spends and the money of course goes directly to the bankers once the fed gets it so they can loan it back out to us.

They also knew back on 2004/2005 they went too far and bought Congress off to change things. It didn't work out to well for them as we can see. The means test means nothing when so many are unemployed.

[banca rotta]

I would not be surprised if one day we see someone registered with the name of USA asking what the country needs to do to file for a chapter 7. lol

We have some real gurus on this board. Gurus who between them probably have more financial knowledge (and common sense) than half the house of rep and congress, combined.

Trust me they in congress know exactly what's going on. We all found out the hard way. They knew all along.

They have no political will to fix it so they keep creating money out of thin air and will let the next generation deal with it.

By then most of us will have forgotten today's problems.

[Overmylimit]

I used to take the side of Flamingo and still do to a point but as 2bshinyandnew points out I'm beginning to think like a lot of you cynics out there and realize the bankers do run the country and do bare a great deal of responsibility of all the current problems.

They simply create debt so they can create more debt and so on. Taxpayers pay the interest to the fed on all the money congress borrows and spends and the money of course goes directly to the bankers once the fed gets it so they can loan it back out to us.

They also knew back on 2004/2005 they went too far and bought Congress off to change things. It didn't work out to well for them as we can see. The means test means nothing when so many are unemployed.

Agreed: I usually agree with Flamingo also but there are times.....the bottom line my debt is my own fault; however most of us are brought up seeing the system as it is now so we go along with the way things are. If you really want to look at the big picture we are all in debt for good, even people who filed years ago and have little if any debt now still pay $$ to the Goverment and in turn the Goverment gives $$ to Banks so yes, Banks do run the Country. Don't kid yourself it might be a lot easier to pay your bills and live after BK but we are ALL still in debt.

I'm not trying to open a can of worms here but with the 200k in taxes I paid in the last few years for my business you mean I can't even get a pot hole fixed on my street??! So even after all my debt is gone if I live in America I am in debt whether it be taxes or insurance or other fees.

[Flamingo]

2Bshineyandnew wrote: You sound like a quasi Stockholm Syndrome victim. As long as you keep trying to convince yourself and others to accept 100% of the blame (snip...)
The economy is about to IMPLODE, and you are sitting there piously stating that "it all comes down to how we personally handle our lives and how we personally view credit".

For some reason everyone is thinking I am stating that all of the blame is on the consumer and not on the credit issuers - please go back and reread my postings. I am not saying that - I am saying that responsibility lies also with the consumer for overextending themselves and not being able to say "no" to more and more credit. Shabam I believe knows what I am trying to say inasmuch as he/she states in his/her posting that basically the more he/she made the more credit he/she was offerred. That doesn't mean the consumer has to accept the credit; it's hard for many folks to say no and then the bills go up and up and then comes the job loss and many people stand there blinking and wondering what happened and how they got into the mess they are in and they point the finger at the banks for extending them more and more credit. They forget they just had to have that big new gizmo on their front lawn to outdo the Smith's gizmo they just placed on their front lawn down the street, even though they didn't need the gizmo to begin with. Many of us now can see the credit traps set by the credit card companies and going through BK makes us more aware of what can go wrong and what made it go wrong.

Consumers of today are made to believe by TV, radio, commercials, other people, etc. that the more you have materially and the better the product, the more important or sexy you are. So we can also blame all the name brands out there and their PR/marketing staff for part of the problem too.

Everyone is so fast to blame the banks and creditors for everything when some of the blame is our own. I agree that some of the things that creditors do just because they can are outrageous and need to be controlled cause I saw it myself as our rates went up making it impossible for us to even consider not filing for bankruptcy. But then again it was us who made the bill so high to begin with and when disaster struck with a cut off of 70% of our income, we were left spinning in place wondering what to do and how we got there. It takes a while but the reality and the truth of the situation eventually sets in. We could just have said "no."