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Bankruptcy Filings Fall 9 Percent Over Last Year

Associated Press
Published | Updated

WASHINGTON – Bankruptcy filings fell about 67 percent in the third quarter and more than 9 percent in the last year, according to data released Monday by the Administrative Office of the U.S. Courts.

There were 155,833 total bankruptcy filings in the third quarter, compared with 467,333 in the year-ago period. During the 12-month period that ended June 30, there were about 1.5 million bankruptcy cases filed in federal courts compared with more than 1.6 million in the year-ago period.

It was the smallest number of filings since the 12-month period ended September 2001, according to the federal court data.

Industry insiders said the drop was tied to the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, which went into effect in mid-October and made filings more difficult and expensive.

There were 667,431 filings in the first quarter ended Dec. 31, but the number plummeted to 116,771 in the second quarter.

"I can definitely say that right before the act went into effect the amount of cases spiked, and immediately following the law, it dropped dramatically and hasn't picked up since," said Suren Adams, owner of Adams Law Office LLC in Bowie, Md.

Adams said she saw a more than 50 percent increase in bankruptcy cases in the month before the act became law, but now handles about 15 percent of the pre-act workload.

Lundquist Consulting, a Burlingame, Calif., company that tracks personal bankruptcy statistics, said the federal statistics mirrored their own and also attributed the drop to the new law.

There were 31,562 businesses that filed for bankruptcy in the 12-month period ended June 30, a 2.6 percent decrease from 32,406 in the year-ago period, according to the federal court data.

Filings under Chapters 7, 11, and 13 all fell, while only Chapter 12 filings rose, with 360 compared with 290 in the year-ago period. Chapter 12 is an extension of Chapter 11, which protects companies from creditors' lawsuits while reorganizing, and applies to family farms.

Larry Ball, a shareholder and attorney who specializes in bankruptcy cases at Hall Estill in Oklahoma City, said the firm saw a large increase in Chapter 7 filings last year before the law went into effect, but "barely any cases are getting filed now."

"I'd say the law had its intended effect: to keep people from filing for bankruptcy," Ball said.