Understand the complexities and nuances of the Bankruptcy Code to better advise clients and prepare for court.
By Diane Davis
Bankruptcy filings for the 12-month period ending Dec. 31, 2016, dropped 5.9 percent since last year and are the lowest number of filings for any calendar year since 2006, according to statistics released Jan. 25 by the Administrative Office of the U.S. Courts (AOUSC).
The December 2016 annual bankruptcy filings totaled 794,960, compared with 844,495 cases filed in calendar year 2015, the AOUSC said.
This is the sixth consecutive calendar year that the bankruptcy filings have fallen, according to the AOUSC. It was the first calendar year since 2011 that the rate of annual decline was less than 10 percent, the AOUSC said.
“We have historically low filing rates,” Professor Robert Lawless, University of Illinois College of Law, Champaign, Ill., told Bloomberg BNA Jan. 25.
“Filing rates haven’t been this low since 1987,” he said. Lawless said he discounts 2005 and 2006 due to “huge anomalies in the data,” and goes back to the 1990s for filing rates.
“The numbers show that bankruptcies are flattening out,” Lawless said. “We’re very close to the bottom,” he said.
The number of Chapter 11 filings has been “essentially flat for the last three years,” according to Lawless.
The slight increase in Chapter 11s from the AOUSC’s statistics might be accounted for in the “different way subsidiaries are counted,” he said. In Chapter 11 cases, all related entities are counted as separate entities for bankruptcy filing purposes, he said. This means that one economic business unit might have 80 Chapter 11 filings, he said.
The Chapter 11 filings are mostly small businesses, Lawless said. There are about 15 percent of individual Chapter 11 filings in that group, and a few, 100 or so, are large or medium corporations. The rest are small businesses, he said.
While it is hard to predict what’s going to happen next without a crystal ball, the bankruptcy filings should “more or less stay the same in the current economy unless there is some external shock, which could change things,” Lawless said.
Lawless predicts that for 2017 there will be “767,000 U.S. bankruptcy filings,” and that the “rate of decrease is decreasing.” He writes about how he reached his prediction in a blog on Credit Slips, “A Discussion on Credit, Finance, and Bankruptcy,” at http://src.bna.com/lGv.
The majority of bankruptcy filings involve non-business debts. During the 12-month period ending Dec. 31, 2016, non-business bankruptcy filings totaled 770,846, down from 819,760 non-business bankruptcy filings in the previous year.
Business filings during the 12-month period ending Dec. 31, 2016, fell to 24,114, from 24,735 in the previous year, the AOUSC said.
The number of bankruptcies filed by Bankruptcy Code chapter for the 12-month period ending Dec. 31, 2016 are as follows:
To contact the reporter on this story: Diane Davis in Washington, D.C. at DDavis@bna.com
To contact the editor responsible for this story: Jay Horowitz at JHorowitz@bna.com
The AOUSC's report is available at: http://www.uscourts.gov/news/2017/01/25/bankruptcy-filings-fall-59-reach-lowest-level-2006
Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.
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