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FOR IMMEDIATE RELEASE
Contact: Mana Zarinejad
(703) 739-0800 ext. 125

Bankruptcies Break Another Record
During 12-Month Period Ending Sept. 30

November 23, 1998, Alexandria, Va.—The total number of bankruptcies filed during the year ending Sept. 30 totaled 1,436,964, up 5.1 percent from the same 12-month period in 1997, according to data released Monday by the Administrative Office of the U.S. Courts.

Personal filings continue to drive the increase. Total personal bankruptcies, which accounted for 96.7 percent of all filings during the 12-month period, increased by 5.8 percent to 1,389,839.

By contrast, business bankruptcies decreased by 15.1 percent to 47,125.

"Continued high levels of consumer spending and debt have led to sustained high rates of bankruptcies," said Samuel J. Gerdano, executive director of the American Bankruptcy Institute (ABI). "That 1998 will set another record of personal bankruptcies ensures that Congress will continue to take a hard look at the Bankruptcy Code," he added.

The rising number of personal bankruptcies has led many members of Congress to question the current language of the Bankruptcy Code. Bankruptcy reform legislation died during the last session of the 105th Congress, but is likely to be reconsidered this spring.

A major issue of the legislation is whether some debtors who have the ability to repay a portion of their debts in chapter 13* (repayment of debts through future income) of the Code instead file chapter 7 (liquidation of assets to repay debts). In the 12-month period ending Sept. 30, a total of 996,905 petitions, or 71.7 percent, were filed under chapter 7 while 392,053 petitions, or 28.2 percent, were filed under chapter 13.

ABI will release results of a study on the ability of individual debtors to repay debts in chapter 13 rather than chapter 7 on Tuesday, Dec. 1, at 10 a.m. in Room 2237 of the Rayburn House Office Building in Washington.

For the quarter ending Sept. 30, the total number of bankruptcies decreased slightly, the first drop this year, to 361,205 total filings, a 3.4 percent drop from the second quarter.

To date this calendar year, there have been 1,088,733 bankruptcies, outpacing record filings in 1997. Bankruptcy filings surpassed 1.4 million in 1997, with 1,055,756 in the nine-month period ending Sept. 30, 1997.

The total number of personal bankruptcies decreased the third quarter during by 11,049, or 3.2 percent, to 350,859. Of those, the breakdown is as follows: 251,099 chapter 7s; 201 chapter 11s; and 99,559 chapter 13s.

The total number of business filings during the third quarter decreased by 1,206, or 11.7 percent, to 10,346 filings, during the third quarter of the calendar year. Of those, the breakdown is as follows: 6,529 chapter 7s; 1,789 chapter 11s; 222 chapter 12s; and 1,798 chapter 13s.

Last month, a study of public companies in bankruptcy showed a 57 percent increase in large chapter 11 cases.

For statistics on a particular region or historical trends or to talk to someone in your area, contact ABI Public Affairs Coordinator Mana Zarinejad at (703) 739-0800 or at mana@abiworld.org. Statistics can also be retrieved online at http://www.abiworld.org/stats/newstatsfront.html.

ABI is the largest multi-disciplinary, non-partisan organization dedicated to research and education on matters related to insolvency. ABI is not an advocacy group. Instead ABI was founded in 1982 to provide Congress, its members, journalists and the public-at-large with unbiased analysis of bankruptcy issues. The ABI membership includes more than 6,400 attorneys, bankers, judges, professors, lenders, turnaround specialists, accountants and other bankruptcy professionals providing a forum for the exchange of ideas and information. For additional information on ABI, visit ABI World at http://www.abiworld.org.

 

Top Ten Districts With Highest Percentage Increases in Filings in the 12-Month Period Ending Sept. 30, 1998 Versus the Identical Period in 1997

District

Percentage Increase

1   Hawaii 32.7 %
2   District of Utah 21.1 %
3   Middle District of Pennsylvania 18.3 %
4   District of "District of Columbia" 18.2 %
5   District of Nevada 18.0 %
6   Eastern District of Oklahoma 17.5 %
7   Northern District of Florida 15.9 %
8   District of Maryland 14.8 %
9   Southern District of Florida 14.5 %
10 District of Idaho 14.2 %

 

*Definitions from Bankruptcy Overview: Issues, Law and Policy, by the American Bankruptcy Institute

Chapter 7 of the Bankruptcy Code is available to both individual and business debtors. Its purpose is to achieve a fair distribution to creditors of whatever non-exempt property the debtor has and to give the individual debtor a fresh start through the discharge in bankruptcy.

Chapter 11 of the Bankruptcy Code is available for both consumer and business debtors. Its purpose is to rehabilitate a business as a going concern or reorganize an individual’s finances through a court-approved reorganization plan.

Chapter 12 of the Bankruptcy Code is designed to give special debt relief to a family farmer with regular income from farming.

Chapter 13 of the Bankruptcy Code is available for an individual with regular income whose debts do not exceed specific amounts, typically used to budget some of the debtor’s future earnings under a plan through which creditors are paid in whole or in part.

###

Contact:    Mana Zarinejad
                 ABI Public Affairs Coordinator
                 (703) 739-0800 ext. 125
                 mana@abiworld.org         

Web posted and Copyright © November 23, 1998, American Bankruptcy Institute.


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