Chapter 13 Filings Continue Upward Trajectory in July

The Big Picture on Bankruptcy Filing Data

AIS Insight Reports provide the bankruptcy community with comprehensive bankruptcy filing data with helpful narrative explanations, as well as charts and graphs that help tell the story of the previous month’s filing patterns. This information allows stakeholders to drill down into the numbers to reach their own conclusions and perhaps factor the data into their own business forecasting.

Based off our customary data and analysis, we made the following observations:

• Chapter 13 filings continue turn in a higher direction. The number of chapter 13 cases filed in July, while slightly less than June, continued to show substantial growth when compared to the same month during the previous year and when compared to the previous 12-month period. Chapter 13 filings, which traditionally account for roughly 30 percent of all bankruptcy filings, are up nearly 40 percent year to date compared to January – July 2021.
• Chapter 7 filings continue to lag behind the previous year, but at a slower rate of decrease. Slowing trends (in either direction, up or down) are often a harbinger of a new pattern. In this case, the slowing decrease may provide a signal that chapter 7 filings will actually increase in the near or mid-term future.
• Because chapter 7 and 13 cases constitute such an overwhelming share of all bankruptcy cases, it is not surprising that the total decrease in filings in July is about 77 percent smaller than April. The percent decrease in overall filings from January to April 2022 was 17.5 percent; the overall decrease in July was a relatively modest 4.79 percent which followed the more recent pattern of the past three months.

Below you will find two graphs that illustrate these patterns.

Figure 1 shows weekly chapter 7 and chapter 13 filings with various gyrations. But the lines through weekly filings for each chapter show upward trends during this calendar year.

Figure 1

Figure 2 shows another telling point. Chapter 13 filings increased by an extraordinary 39.48 percent compared to the previous 12-month period.

Figure 2

Commentators like Ed Flynn, a premier expert on bankruptcy filing analysis at the American Bankruptcy Institute, suggest that total bankruptcy filings will finish this calendar year below last year’s low filing number. But mapping the filings by other than cumulative calendar year identifies patterns that may augur a future rise, at least in consumer filings.

Lastly, a recent study by the New York Federal Reserve Bank, which was widely reported in the financial press, notes that consumers are starting to take on more credit card debt as stimulus payments and other pandemic-related relief runs out. Historically, an increase in the amount of consumer debt, both in good times and bad, is a tell-tale sign of more bankruptcies to come.

That is more than enough data to digest for now. Financial institutions and other creditors plan far into the future. Possible changes in bankruptcy filings may need to weigh heavily in their forecasts.

To download the July Insight Report, click here.

Commentary provided by Clifford J. White, Senior Advisor - Bankruptcy Compliance for AIS.