Chapter 13 Filings Continue to Grow in January

According to the latest AIS Insight Report, January filings totaled 26,203, down 6.24% from the previous month and 18.97% from January 2021 (Figure 1). This marks the lowest number of filings for the month of January in more than 20 years.

Chapter 7 filings (15,182) continue to decline for the 10-consecutive month while Chapter 13s accounted for 40.93% of all filings, an increase of 12.75% from January 2021 (Figure 1).

AIS Insight_May 2022_CHAPTER 11 SUB CHAPTER V BANKRUPTCIES (GRAPH-GREY)-1-1

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AIS Insight_Jan 2022_BANKRUPTCY YEAR ON YEAR COMPARISON-1

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AIS Insight_Jan 2022_BANKRUPTCY FILINGS 2017 - 2022 (GRAPH)-1

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We’ve continued to monitor the activity of Chapter 7 and Chapter 13 bankruptcy filings. Our analysis reveals that Chapter 7 filings totaled 15,182, declining for 10 consecutive months (Figure 4). On the other hand, Chapter 13 filings totaled 10,724 (Figure 4). Chapter 13 filings continue to follow an inconsistent pattern of filings (Figure 4). Experts believe the consecutive decline in Chapter 7s can be attributed to stimulus and forbearance programs, allowing more debtors to seek protection under Chapter 13 bankruptcy.

AIS Insight_Jan 2022_ANNUAL CHAPTER 7 & 13 FILINGS (TABLE)-1

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AIS Insight_Jan 2022_CHAPTER 7 & 13 FILINGS 2016 - 2021 (GRAPH)-1

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AIS Insight_Jan 2022_CHAPTER 7 V 13 FILINGS - GREY-1

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For the month of January 2022, Chapter 11 filings decreased 23.39% from December 2021 totaling 359 (Figure 7). Chapter 11, Subchapter V filings increased 19.10% from December 2021 totaling 89 (Figure 7).

When comparing Chapter 11 filings from January 2021 to January 2022, we observed a 47.31% decrease (Figure 7). Whereas, when comparing Chapter 11, Subchapter V filings from January 2021 to January 2022, we saw a 8.16% increase in filings (Figure 7).

AIS Insight_Jan 2022_CHAPTER 11 BANKRUPTCIES (TABLE)-1

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AIS Insight_Jan 2022_CHAPTER 11 BANKRUPTCIES (GRAPH-GREY)-1

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AIS Insight_Jan 2022_CHAPTER 11 SUB CHAPTER V BANKRUPTCIES (GRAPH-GREY)-1

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The highest percentage of bankruptcies for January 2022 came from the South (East) (30%), followed by North Central (East) (19%), South (West) (16%), Pacific (13%), Northeast (11%), Mountain (6%), and North Central (West) (5%) regions of the country (Figure 10).

AIS Insight_Jan 2022_BANKRUPTCY FILINGS BY REGION (PIE GRAPH)-1

Figure 10

Since the commencement of COVID, the numerous stimulus packages coupled with federal and state moratoriums on foreclosure and repossessions, forbearances and deferments, government assistance has acted as the alternative means of coping with financial distress rather than the protections offered by various forms of Bankruptcy.

While congress contemplates changes to the Bankruptcy Code, including dischargeability of at least some government, backed student debt, and many stimulus benefits come to an end, the expectation among bankruptcy practitioners has long been that there will be a rise and a dramatic rise in filings, especially in the area of consumer bankruptcy.

Precisely when this rise will come or how dramatic it will be will remain the unanswered question. Congressional actions regarding student loans or other potential strengthening of consumer rights under the code may make filing more appealing and beneficial.

Whether the increase in bankruptcy filings and potential legislation is coming in the next quarter or the next year remains a strongly debated issue, but one without any clear conclusions.

The one fact on which all seem to agree is that the many government stimulus programs haven’t cured but merely delayed the need for bankruptcy relief.

To download the January Insight Report, click here.