Bankruptcy practitioners are often labeled as not being the most well versed in the rules of evidence. In the case of analyzing filing statistics over the last several months, however, one would not need to know the rules very well to prove the conclusion that filings continue trending downwards because the evidence is abundant. Consider the following[1]:
- Total bankruptcy filings in the U.S. decreased 12% in May 2013 when compared to May 2012 (96,430 filings in 5/13 v. 109,538 filings in 5/12) – the decrease was 8% in April 2013 when compared to April 2012
- Consumer bankruptcy filings in the U.S. decreased 11% in May 2013 when compared to May 2012 (92,413 filings in 5/13 v. 104,197 filings in 5/12) while commercial filings decreased 25% in May 2013 when compared to May 2012 (4,017 filings in 5/13 v. 5,341 filings in 5/12) – the decreases were 7% for consumer filings and 16% for commercial filings in April 2013 when compared to April 2012
- A comparison of May 2013 filings to April 2013 filings shows a 4% overall decrease, with a 4% decrease in consumer filings, an 8% decrease in commercial filings, and a 24% decrease in Chapter 11 filings
With respect to the downward trend in consumer filings, most attribute the trend to lower interest rates, tightening of lending standards, decreased consumer spending, a slightly improved economy, and loan modifications outside of bankruptcy. As for commercial filings, most attribute the downward trend to cost cutting, improved financial stability, and more favorable credit terms.
On the flip side, there are considerations that would support the conclusion that the downward trends could reverse in the near future. For consumers, the year 2013 marks the 8-year anniversary of the passage of BAPCPA, so there could be a spike in consumer Chapter 7 filings. Other considerations include continued high unemployment, high food and gas prices, stagnant salaries, a potential increase in interest rates, and mounting student loan debt. As for businesses, there are likely companies that will have to address debt ceilings that were pushed out to 2013 and 2014 by their lenders, which could lead to an increase in bank defaults. In addition, the access to business credit is crucial and can be easier for bigger companies but more difficult for smaller ones. And in fact, Chapter 11 filings did increase 5% in April 2013 when compared to April 2012 (701 filings in 4/13 v. 666 filings in 4/12).
Stay tuned, and keep your rules of evidence handy just in case.
[1] Source: Epiq Systems, Inc. and American Bankruptcy Institute.
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