Bankruptcy Filings Dropped 6 Percent in 2016

Understand the complexities and nuances of the Bankruptcy Code to better advise clients and prepare for court.

By Diane Davis

Bankruptcy petitions dropped 6 percent to 805,580 in 2016, compared to 2015, according to the 2016 Annual Report of the Director on the Judicial Business of the U.S. released March 14 by the Administrative Office of the U.S. Courts for the fiscal year ending Sept. 30, 2016.

This was the lowest total since 2007, the first full fiscal year after the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 took effect.

Consumer or non-business petitions accounted for approximately 97 percent of all petitions filed and fell 6 percent to 781,123, according to the report.

Business petitions, which account for 3 percent of all petitions, fell 2 percent to 24,457.

Consumer Bankruptcy Filings

Most consumer bankruptcy petitions are filed under Chapter 7 or Chapter 13. In Chapter 7, non-exempt assets are liquidated and proceeds are distributed to creditors. In Chapter 13, debtors with regular income can retain their assets but they must make monthly payments into a plan to pay off their creditors.

Filings under Chapter 7 fell 9 percent to 498,367 in 2016, and constituted 62 percent of all filings, down from 64 percent in 2015, the report states.

Nonbusiness Chapter 7 filings also fell 9 percent and amounted to 62 percent of all nonbusiness filings, down from 64 percent in 2015.

Business Chapter 7 petitions fell 8 percent and equaled 62 percent of all business filings, down from 66 percent in 2015, according to the report.

Filings under Chapter 13 remained “fairly stable,” decreasing 1 percent to 299,150, the report states. These petitions equaled 37 percent of all filings, up from 35 percent in 2015.

The 296,824 nonbusiness Chapter 13 petitions accounted for 38 percent of all nonbusiness petitions, up from 36 percent in 2015.

The 2,326 business Chapter 13 petitions is an increase of 10 percent from 2015, the report states.

Business Petitions

Chapter 11 allows businesses to reorganize and continue operating. It is available to individuals whose debt exceed statutory limits for filing under Chapter 13.

Chapter 11 filings went up 6 percent to 7,450, the report states. The 6,329 business Chapter 11s amounted to 26 percent of all business filings, up 2 percent from 2015.

The three remaining chapters—Chapters 9, 12, and 15—collectively accounted for less than 1 percent of all petitions filed.

Chapter 9 is for local governments and instrumentalities, Chapter 12 covers family farmers and fishermen and Chapter 15 applies to foreign corporations and individuals.

To contact the reporter on this story: Diane Davis in Washington at DDavis@bna.com

To contact the editor responsible for this story: Jay Horowitz at JHorowitz@bna.com

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