Bankruptcy filings were down 11% in 2011. Since 2006, the number of bankruptcy cases filed each year has grown. Last year, for the first time in several years, they fell nationally. There are a couple of reasons for this.
The most optimistic perspective on these numbers is the one that associates an improving economy with a reduction in bankruptcy filings. And that may, in fact, be at least partially true. Other, more wary perspectives, see two other facts behind the declining numbers. We think those are a little more interesting.
First, credit and bankruptcy go together like a horse and carriage: first comes credit, then comes bankruptcy. If the credit availability shrinks, then the number of bankruptcy filings will shrink, as well. Maybe not immediately, but a two or three year lag seems about right. The availability of credit shrank dramatically in 2008, which means there was less debt to default on (and discharge) by the time 2011 rolled around.
Secondly, the economic damage done in 2008 and since has largely been concentrated in a few specific kinds of industries: real estate, construction, retail, and the like. If you were in those industries in 2008 and 2009, you were likely hit hard and may have had to file bankruptcy. Since those early days of the recession, those industries have remained depressed, but the sickness hasn’t really roamed freely infecting other industries. If things were bad for your business in 2008, they’re still probably bad. If things were alright for you in 2008, they’re probably still alright. What that means for bankruptcy filings is that over the years, those who were dramatically affected by the recession have already been through bankruptcy.
Our firm practices primarily in the Eastern District of North Carolina (approximately, Wake County to the coast). Here are the 2011 numbers for that region: Total filings: 9,9964 Chapter 7: 3,489 Chapter 11: 150 Chapter 13: 6,319 Chapter 12: 6