Debt Relief Industry

Bankruptcies Down. Pipeline Cleaning Out.

It looks like the predictions of decreasing demand for debt relief services is coming true in all sectors now. As I’ve been saying, without consumers cleaning out their debt through some means and creditors not extending credit in buckets like they were before, demand for debt relief services will be down.

This is the latest from the American Bankruptcy Institute.

The total number of U.S. bankruptcies filed during the first six months of 2011 dropped 8 percent over the same six-month period in 2010, according to data released today by the Administrative Office of the U.S. Courts. Total filings reached 745,968 during the first half of calendar year 2011 (January 1-June 30), compared to 810,209 cases filed over the same period in 2010. Total bankruptcy filings increased 4 percent, however, during the second quarter of 2011 (April 1-June 30), which totaled 379,790, from the 366,178 filings in the first quarter of 2011 (January 1-March 31) due to an increase in consumer bankruptcy filings.

“The broad trend of a leveling or even decline in consumer bankruptcies in tandem with a sluggish economy is a reflection of the deleveraging of household debts and tightening of consumer credit over the past year,” said ABI Executive Director Samuel J. Gerdano. “Should these trends persist, we expect to see fewer consumer bankruptcies in 2011 than were filed in 2010.”

Filings by individuals or households with consumer debt decreased 8 percent to 721,288 for the six-month period ending June 30, 2011, from the 2010 first-half total of 781,150. Consumers filing for chapter 7 protection decreased 9 percent to 518,097 during the first half of 2011 from 571,417 during the first six months of 2010. Consumer chapter 13 filings dropped as well, decreasing 3 percent as 202,292 consumers filed for chapter 13 in the first half of 2011, down from 208,778 during the first half of 2010. The 367,486 total consumer filings for the second quarter of 2011 showed a 4 percent increase from the 353,802 total consumer filings in the first quarter of 2011.

The 379,790 total filings for the second calendar quarter 2011 (April 1-June 30) represented a 10 percent decrease from the second quarter 2010 filing total of 422,061. Consumer filings also decreased 10 percent from 407,609 recorded in the second quarter of 2010 to 367,486 filings in the second quarter of 2011. Business filings decreased 15 percent from 14,452 in the second quarter of 2010 to 12,304 filings in the second quarter of 2011.

The 1,529,560 total filings for the 12-month period ending June 30, 2011, represented a 3 percent overall decrease from the same period in 2010, which totaled 1,572,597. The bankruptcy filing rate per thousand U.S. residents totaled 4.85 for all chapters during the 12-month period ending June 30, 2011, as 3.44 Americans per thousand filed for chapter 7 while 1.37 per thousand filed for chapter 13 bankruptcy.

Nevada maintained its position as the state with the highest per capita filing rate in the country, with 10.13 residents per thousand filing in all chapters, and also had the highest per capita filing rate for chapter 7 filings at 7.62. The state with the highest per capita filing rate for chapter 13 bankruptcy was Alabama at 3.92 per thousand for the 12-month period ended June 30, 2011.

Non-business filings for the 12-month period ending June 30, 2011, were down to 1,477,426, a 2 percent decrease from the 1,512,989 total non-business filings over the same period in 2010. Business filings for the 12-month period ending June 30, 2011, totaled 52,134, down 13 percent from the 59,608 business bankruptcy petitions filed in the 12-month period ending June 30, 2010. – Source

Bankruptcies in July 2011 are down 18 percent from July 2010 filings.


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Steve Rhode

Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.

4 Comments

  • Steve, I think we need to be a bit clearer here, we’re talking filings and 8% over 6 months is not a WOW figure, at least not for me. Late last month (around 3 weeks ago) in another article you said;

     “As long as unemployment continues to be high (which it is) then bankruptcy levels should be expected to remain high until consumers have dealt with their lingering debt in the face of weak employment”. I added the (which it is)

    The key words for me are “until consumers have dealt with their lingering debt” this begs to ask a few questions; Have they? If so, how did they do it? Unemployment hasn’t changed much, sure we saw a slight uptick in job creation but, we’re still runing at around 9.1% nationally. Depending on what/whom you read I can make a case for either side of consumer debt levels.

    Why was there a decrease of 64,241 consumers in the first 6 months of 2011 as compared to the first 6 months a year ago? How do consumers deal with lingering debt?

    Pay it off in full; well you need money to do that. Sell stuff, the lottery, extra work, borrow from friends and relatives etc…
    Start making minimum payments; again, you need money here too.
    Make arrangements with the creditor; enroll into hardship programs, maybe some time off to recoup.
    Apply a debt relief service, CCC – DMP – DSP,  you’ll never get accurate data here…
    File Bankruptcy

    Keep in mind, we’re talking about people in over their head so, the consolidation option via equity or personal loan is more than likely off the table.

    Off but somewhat on topic, I was talking with a Bankruptcy attorney I send referrals to and he told me something I still have a hard time believing. Mortgage note holders (large banks and institutions) are forcing consumers to move/react by setting up foreclosure sale dates and then canceling them the day of the sale because they really don’t want the property or the servicing costs. Talk about manipulation!

    My point to all this is; something caused the decrease (if the data was not manipulated), can anyone tell me what that was?

    • I agree. 8% is not a WOW figure but the statement “Bankruptcies in July 2011 are down 18 percent from July 2010 filings,” I think is.

      The question is, have consumers now dealt with their problem debt if the level of bankruptcies is accelerating downward. 

      We need a couple of more months to tell if that is the case. If it is then we should see the year over year numbers lower in 2011, maybe not in the 18% range but at least substantially noticeable.

      A decrease in consumer interest in debt relief solutions and a continued drop in bankruptcy rates would be a good indicator the pipeline of bad debt is significantly cleaned out to the point where it is not pressuring consumers to take action.

      Other recent figures see to incdicate this as well, including fast dropping mortgage delinquencies and much, much lower charge off rates on credit cards.

      Lingering debt will be dealt with by either addressing it through debt relief invervention, which includes bankruptcy, or being able to repay it at least in accordance with the contractual terms.

      Nice comment about the banks. Banks are also initiating foreclosure proceedings but not accepting the titles back whick leaves the old homeowner on the hook for taxes they no longer own. Crafty.

    • This is not really my area, but there are something like 8 million discharges since the 2005 bankruptcy reform lengthened the waiting period to 8 years.  I’m sure some of these folks would file again if they could, but they can’t.

      • Interesting that you mention that. The 2010 bankruptcy data released from the U.S. Courts shows, “In 26 percent of the chapter 13 cases filed during 2010, debtors indicated they had filed for bankruptcy during the previous eight years, 2 percent fewer than in 2009.”

        There was no corresponding statement on Chapter 7 refiles.

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