According to statistics presented by the Adminsiteative Office of the US Courts, bankruptcy filings are down yet again. In Jackson County, Missouri, where the heart of Kansas City lives, here were only 2,478 bankruptcies filed in the calendar year ending in March. Annual bankruptcy filings for the country fell below 800,000 this year.
In 2004, before BAPCPA was implemented, there were approximately 1.6M bankruptcies filed throughout the country. In 2005, after BAPCPA went into effect, bankruptcy filing came close to reaching 2.1M. BAPCPA was the largest overhaul to the bankruptcy system we’d seen in 40 years and the month prior to its effective date saw the largest number of bankruptcy filings in the history of the bankruptcy code. Shortly after its implementation, bankruptcy filings were cut more than in half as the new code (lobbied for and practically written by credit card companies) scared debtors away from seeking the courts protection. In 2006, a mere 600,000 debtors filed for protection. As the mortgage bubble burst and problem loans were going into foreclosure, we saw increases to filings as borrowers tried to save their homes – 850,000 in 2007 and then 1.1M in 2008. In 2009 & 2010, it appeared that the filings had returned to their original rhythm when filings almost reached their pre-BAPCPA level of roughly 1.5M per year, but in the 7 years after that it’s seen significant cumulative decline, now sitting at almost half of the number of filings America used to see.
What is this attributed to? Some believe the filings are down because the economy has recovered from the mortgage crisis. Some believe that Americans now find it more difficult to obtain credit as the restrictions and requirements necessary to obtain it have increased. Some believe the problem mortgages have worked their way out of the system so that fewer people have a need to file. Some believe the new disclosures have scared people into believing they’ll lose all of their property if they file for bankruptcy. Others believe the large change to the code that BAPCPA implemented has achieved its goal – it just took a little longer to see the effects due to the mortgage crisis. The change has certainly made it more expensive to file for bankruptcy, as we see increases in filing fees as well as increases in attorneys fees due to more disclosures and more complexity in the code. Perhaps it’s a combination of all of the above.
Whatever the reason, we may sit in this lull of a filing mode until a new crisis arises, which I believe may be with student loan treatment. Far too many 20-something’s are saddled with hundreds of thousands of student loan debt and little to no job prospects. As young lawyers and doctors take to bartending on the weekends in order to keep up with rising interest rates on their student loans. At this point, it appears to be a “wait and see” game.
These statistics and more can be referenced here: http://www.uscourts.gov/news/2017/04/19/march-2017-bankruptcy-filings-down-47-percent.