The US Courts website maintains statistics for all bankruptcy filings from 1995 through 2007. Many media outlets have reported that bankruptcies are on the rise; the cumulative data that was released at the end of fiscal year 2007 (September 30, 2007) contradicts these reports. In the 2007 fiscal year, there were 25,925 business bankruptcies filed and 775,344 non-business bankruptcies filed in federal court for a total of 801,269 bankruptcies filed in 2007. In 2006 the numbers were 27,333 business filings and 1,085,209 individuals for a total of 1,112,542.
One of the main reasons for the decrease in bankruptcies is the implementation of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA). In the years prior to the passing of this act, bankruptcies totals were significantly higher. In 2003 there were a total of 1,661,996 bankruptcies. That number dropped to 1,618,987 in 2004. In 2005, the number rose in anticipation of the upcoming changes to the bankruptcy laws. Over 1.7 million individuals and businesses filed for bankruptcy protection in 2005.
In addition to maintain data on the total number of bankruptcies filed by businesses and individuals, the US Courts website also tracks the frequency that each chapter of bankruptcy is used by consumers and companies. In 2007, chapter 7 bankruptcy protection was by far the most frequently used with 484,162 cases. Chapter 13 wasn’t far behind with 310,802 cases. There were 5,888 chapter 11 filings and only 361 chapter 12 cases.
Looking at the numbers even more, you see the source of some of the data used by media outlets to tout an increase in bankruptcies. When looking at the 4th fiscal quarter of 2007, the number of bankruptcies filed was higher than in the 4th fiscal quarter of 2006. In July of 2006 there were 52,016 filings compared to 70,869 in July of 2007. August 2006 saw 59,565 cases where August 2007 saw this number rise to 78,963. The fiscal year ended in September of 2007 with 69,077 cases up from 57,492 in September of 2006. So in this sense, the bankruptcy rates were up when compared to the previous years.
Although fiscal year 2007 ended with a drastic increase in bankruptcy cases when compared to the end of fiscal year 2006, the overall amount of bankruptcy cases decreased by 28% from 2006 to 2007. Although the current state of the economy in the United States is fragile, there is hope for consumers. The bankruptcy laws are in place to provide a safe and legal outlet for families faced with insurmountable debt.
