October 10, 2009 in Business

Pace of bankruptcies easing

Decline one more sign of recovery
Tony Pugh McClatchy
 

Personal filings

Personal bankruptcies, which topped 1 million for the year in September, dominate filings.

Commercial bankruptcies account for only about 350 filings a day out of about 6,000 total.

For the first nine months of the year, personal bankruptcies are up more than 34 percent over 2008.

WASHINGTON – In another promising sign of economic recovery, the torrid pace of personal and business bankruptcies slowed during the third quarter.

In the first quarterly decline since the overhaul of bankruptcy laws in 2005, commercial, or business, bankruptcy filings fell 4.5 percent to 22,710 in the third quarter from 23,782 in the second quarter, according to data compiled by Automated Access to Court Electronic Records, an Oklahoma City bankruptcy management and data company.

The 7,405 business petitions filed in August and the 7,215 in September were the first back-to-back monthly declines since November and December of 2006, AACER data show.

According to AACER, consumer bankruptcy filings from July to September continued a streak of 15 consecutive quarterly increases dating to enactment of the Bankruptcy Abuse Prevention and Consumer Protection Act in October 2005.

However, the third-quarter increase – up 2 percent from the second quarter – was smaller than the 15.4 percent spike from the first quarter to the second quarter of 2009. The third-quarter increase also was the smallest quarterly increase since AACER began tracking the data in 2006.

The ebb in filings doesn’t mark an end to the recession – not with unemployment approaching 10 percent, commercial credit still tight, a new round of adjustable-rate mortgages that reset next year and tepid consumer spending amid continuing job losses.

When coupled with rising home mortgage applications and a slowdown in new jobless benefit claims, however, the bankruptcy slowdown offers more hope that the economy is starting to stabilize.

“It’s certainly not bad news that they’re leveling off,” said Robert Lawless, a law professor at the University of Illinois and a bankruptcy expert. “When filings are going down it’s an indication that things are probably doing better. But if you want to use (bankruptcy) filings as an indicator of the economy, we have to recognize they’re a weak indicator and a lagging indicator at that.”

Lawless said the moderation in third-quarter filings was less impressive because the filing rate for all bankruptcies still hovers at about 6,000 a day. That rate has held fairly steady since March.


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