Bankruptcy Filings Expected to Slow in 2011

Although 2010 saw a continuation of the years-long increase in the number of both business and consumer bankruptcy filings, experts and analysts are encouraged by one small indicator of progress. The growth in bankruptcy filings that has persisted over the past several years slowed significantly in the past year, with multiple months showing a drop in bankruptcies over the previous year for the first time in four years.

In sum, there were 1.55 million bankruptcy filings in 2010, which is an increase of approximately eight percent from the 2009 filing rate. Although any increase is certainly not good news, there is a silver lining: that eight percent is a significant drop from the increase of 32 percent from 2008 to 2009, and the increase of 33 percent from 2007 to 2009. Economists predict that this slowdown will continue in 2011 as the economy improves, slowly but steadily.

In addition, two months actually saw a decrease in bankruptcy filing rates. December’s approximately 113,000 bankruptcies was a three percent drop from the same month in 2009, and October filings saw a similar decline. These months marked the first time in four years that an individual month saw a drop in bankruptcy filings, which is a promising step.

According to law professor Katie Porter, the continuing increase in bankruptcy filings is something to be expected. “That is kind of the ‘natural’ level of filings in the kind of the economy we have. We have a lot of debt and a lot of volatility,” she said. “When you combine those things together, the debt makes it hard for people to withstand a debt [such as a job loss or medical emergency] to the system.”

Source: Atlanta Journal-Constitution, “AP: Surge in bankruptcies shows signs of slowing”, Mike Baker, 4 January 2011