2005-2006 Bankruptcy Filing Statistics Comparison Misleading at Best
At long last, the Administrative Office of the Courts yesterday released the fourth quarter and annual 2006 bankruptcy filing statistics; the headline on the Courts' press release reads, "Bankruptcy Filings Plunge in Calendar Year 2006". Of course, the numbers and what they might mean are old news to most of us: AACER information has been available for some time, and even related in an Associated Press story that gave us a solid indication of first quarter 2007 stats before the official sources gave us a peek at the end of 2006.
More importantly, though, the attempted apples-to-apples comparison between 2005 and 2006 is unrealistic and perhaps disingenuous. Yes, there were more than 2 million non-business bankruptcy filings in 2005, and there were fewer than 600,000 in 2006. But the reasons for that dramatic shift have been thoroughly studied, and the one thing most experts agree on is that they don't mean that the new law "worked" and consumer bankruptcy filings have radically declined, never to rise again.
University of Illinois law professor Charles Tabb offered a detailed analysis in the ABI Journal this winter, and predicted filings rising to pre-BAPCPA levels, or close to them. Henry Sommer, President of the National Association of Consumer Bankruptcy Attorneys (NACBA) has repeatedly pointed out both that the rush to file before the law changed in the fall of 2005 absorbed a large number of people who would otherwise have filed in 2006 (and unnaturally raised 2005 filings) and that many people are under the misapprehension that they are no longer able to file for Chapter 7 bankruptcy.
Quarterly filings, as always, tell a different story.
Q1, 2006: 116,771
Q2, 2006: 155,833
Q3, 2006: 171,146
Q4, 2006: 177,599
Q1, 2007: 186,788 (from AACER data)
While proponents of BAPCPA may choose to compare the skewed data from the transitional years side by side as if there were no anomalies, the numbers themselves, broken down in just about any way that makes sense, tell us that there was a dramatic rush to file before the law changed, a dramatic drop-off in filings right after the law changed, and they've been climbing ever since. In fact, a straight like-time to like-time comparison shows that first quarter 2007 filings are 59.9% higher than first quarter 2006 filings.
