Total filings continue to rise in all geographic areas, although the rate of increase has been slowing for about one year. According to statistics compiled by the Administrative Office of the U.S. Courts, during the year ended June 30, 1997, there were 1,316,999 bankruptcy cases filed in the United States—a 26.4 percent increase over the previous year. For the second straight year, filings increased in every state, and were at record levels in 48 states (Alaska and Colorado were slightly higher in 1989). During the year there was approximately one bankruptcy filing per 75 households in the country. Since about one-third of new cases are joint filings, the bankruptcy rate is now nearly one-half of the birth rate.

In most regions, it is expected that the growth rates may start to show modest declines around middle-to-late 1998. Nationwide, filings may peak for this cycle at around 1.5 million filings in early to middle 1999. Even if filings enter a period of decline, historical patterns indicate that it is unlikely that filings will ever fall below one million per year.

Bankruptcy filings have declined during five separate periods since 1960. Each time the decline has lasted between 18 and 36 months, with total decline from the peak between 10 and 20 percent. A decline of 20 percent from 1.5 million filings would still result in 1.2 million filings—more than in any year prior to 1997.

Chapter 11

Chapter 11 case filings have gone in the opposite direction, falling by 54 percent during the last five years. Only 11,159 chapter 11 cases were filed nationwide during the year ended June 30, 1997. In fact, in 44 states chapter 11 filings are now lower than in 1983 (the exceptions being Massachusetts, Connecticut, New York, Delaware, New Jersey and Maryland). A number of factors are probably behind the decline, including the general strength of the economy, relatively low interest rates, the availability of chapter 12 for family farmers, higher debt limits for chapter 13 cases, and more aggressive case management efforts by bankruptcy judges, U.S. trustees and bankruptcy administrators. Barring a severe national recession, a substantial rise in interest rates or major legislative changes, chapter 11 filings are not likely to return to anywhere near the levels from 1983 to 1993.

Percentage of Total Filings

In the mid-1980s, chapter 11 cases accounted for more than five percent of total filings. However, as a result of the massive increases in consumer cases and the large drop in chapter 11 cases, they now represent less than one percent of new filings.

Footnotes

¹All views expressed in this article are those of the author, and do not necessarily represent the views of the Executive Office for U.S. Trustees.[Return to Text]