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BANKRUPTCY FILINGS DURING FIRST HALF OF 2006 FALL TO LOWEST LEVELS SINCE 1986

August 28, 2006, Alexandria, Va.— The total number of U.S. bankruptcies filed during the first six months of 2006 were the lowest first-half calendar year filings on record in 20 years, as filings for the period from Jan. 1 – June 30, 2006 fell to 272,604 from 868,482, the total number of filings for the same period in 2005, according to data released today by the Administrative Office of the U.S. Courts. When combined, the 2006 second-quarter  (April 1 – June 30) bankruptcy filings total of 155,833 and the first-quarter (Jan. 1 – March 31, 2006) filings total of 116, 771 represent the lowest number of calendar filings for the first six months of a year since the first half of 1986, when bankruptcy filings totaled 258,311. The 2006 first-half filings also represent a 68.61 percent drop in filings from the previous year’s first-half filings (Jan. 1-June 30, 2005), when 868,482 bankruptcies were filed. The 2006 second-quarter filings also represent a 66.65 percent drop compared with the 467,333 total filings for the same three-month period ending June 30, 2005.

Total consumer filings for the six-month period from Jan. 1 – June 30, 2006 were 263,660, representing a 69.04 percent decrease from the same period in 2005, in which consumer filings totaled 851,683. The 8,944 business filings from Jan. 1 – June 30, 2006, represented a 46.76 percent decrease from the same period the previous year, in which 16,799 business filings were recorded.

Due in large part to the new requirements of the Bankruptcy Abuse Protection and Consumer Protection Act of 2005 (BAPCPA), the type of consumer bankruptcies filed in the first half of 2006 shifted considerably from the first half of 2005. Chapter 13 filings represented 41.15 percent of all consumer filings in the six-month period ending June 30, 2006, up from 24.15 percent during the same period of 2005. Conversely, the percentage of consumer chapter 7 filings fell to 58.76 percent of total consumer filings in the six-month period ending June 30, 2006, from 75.81 percent in the first calendar half of 2005.

The 1,484,570 total filings during the 12-month period ending June 30, 2006, represent the lowest number of filings in a 12-month period since the 12-month period ending Sept. 30, 2001, when there were 1,437,354 filings. Total filings decreased from the 1,794,795 filings reported for the 12-month period ending March 31, 2006.

Nonbusiness filings for the 12-month period ending June 30, 2006, fell 9.46 percent to 1,453,008 from the 1,604,848 total nonbusiness filings in the 12-month period ending June 30, 2005. The 31,562 total business filings for the 12-month period ending June 30, 2006 represented a 2.6 percent decrease from the 32,406 bankruptcy petitions filed in the 12-month period ending June 30, 2005.

Chapter 13 filings fell 29.48 percent to 313,085 in the 12-month period ending June 30, 2006, from 443,945 in the same period last year. Chapter 11 filings also declined, falling 7.15 percent to 6,224 in the 12-month period ending June 30, 2006, from 6,703 in 2005. Conversely, chapter 12 filings rose 24.14 percent from 290 in the 12-month period ending June 30, 2005, to 360 in 2006.

BUSINESS FILINGS for the three-month period ending June 30, 2006, totaled 4,858, down 44.39 percent from the 8,736 bankruptcy business cases filed in the same period in 2005. NONBUSINESS FILINGS for the three-month period ending June 30, 2006, decreased 67.08 percent from 458,597 in the same period in 2005 to 150,975.

The chapter* breakdown of BUSINESS filings for the three-month period ending June 30, 2006, is: 2,940 chapter 7s, 1,079 chapter 11s, 99 chapter 12s and 729 chapter 13s.

The chapter breakdown of NONBUSINESS filings for the three-month period ending June 30, 2006, is: 91,674 chapter 7s, 131 chapter 11s and 59,170 chapter 13s.

Districts with the Highest Percentage INCREASE in Total Filings for the 12-month period ending June 30, 2006 (compared to the identical period in 2005):

1. District of Vermont: 11.86%
   
2. Northern District of Indiana: 10.63%
   
3. District of Alaska: 8.71%         
   
4. District of the Northern Mariana Islands: 7.14%
   
5. District of Nevada: 5.98%

Districts with the Highest Percentage DECREASE in Total Filings for the 12-month period ending June 30, 2006 (compared to the identical period in 2005):

1. Eastern District of Louisiana: 33.96%
   
2. District of Utah: 31.92%
   
3. Southern District of Georgia: 29.88%   
   
4. Southern District of Alabama: 29.67% 
   
5. Middle District of Georgia: 28.79%

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ABI is the largest multi-disciplinary, nonpartisan organization dedicated to research and education on matters related to insolvency. ABI was founded in 1982 to provide Congress and the public with unbiased analysis of bankruptcy issues. The ABI membership includes more than 11,500 attorneys, accountants, bankers, judges, professors, lenders, turnaround specialists and other bankruptcy professionals providing a forum for the exchange of ideas and information. For additional information on ABI, visit www.abiworld.org. For additional conference information, visit http://www.abiworld.org/conferences.html.

*Definitions from Bankruptcy Overview: Issues, Law and Policy, by the American Bankruptcy Institute.

Chapter 7 of the Bankruptcy Code is available to both individual and business debtors. Its purpose is to achieve a fair distribution to creditors of the debtor’s available non-exempt property.  Unsecured debts not reaffirmed are discharged, providing a fresh financial start.  

Chapter 11 of the Bankruptcy Code is available for both business and consumer debtors. Its purpose is to rehabilitate a business as a going concern or reorganize an individual’s finances through a court-approved reorganization plan.

Chapter 12 of the Bankruptcy Code is designed to give special debt relief to a family farmer with regular income from farming. 

Chapter 13 of the Bankruptcy Code is available for an individual with regular income whose debts do not exceed specific amounts; it is typically used to budget some of the debtor’s future earnings under a plan through which unsecured creditors are paid in whole or in part.