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Contact: Rali Mileva
                (703) 739-0800
                rmileva@abiworld.org

Bankruptcy Filings Increase in First Quarter of 2005, Fall for the 12-Month Period

June 10, 2005, Alexandria, Va. The total number of bankruptcies filed during the first three months of 2005 rose 7.9 percent, according to data released today by the Administrative Office of the U.S. Courts. Non-business filings for the period totaled 393,086, up 8.0 percent from the quarterly non-business filings of  363,890 in the three-month period ending December 31, 2004. Business filings for the period totaled 8,063, up 3.7 percent from the 7,778 bankruptcy cases filed in the three-month period ending December 31, 2004.

Credit card delinquencies and chargeoffs increased slightly in the fourth quarter of 2004. This, together with concerns over the new bankruptcy law, which makes it more difficult for consumers to file chapter 7 bankruptcies, were predicted to lead to a bankruptcy spike in the first quarter of 2005, according to the American Bankruptcy Institute (ABI). In addition, the amount of new debt taken on by Americans rose 10 percent in the first quarter, to $24.8 trillion, the Federal Reserve said on Thursday.

“As we predicted, consumer bankruptcies rose during the first three months of this year, fueled in part by fears over the impact of the coming new bankruptcy law”, said Samuel J. Gerdano, ABI’s Executive Director.  Total filings for the quarter were the third highest first quarter ever.  With the new creditor-friendly law due to fully take effect on October 17, “we expect bankruptcy filings to remain high throughout the summer and early fall, even as households do their best to try to pay down consumer debt,” he added. 

However, the total number of bankruptcies filed in federal courts in the 12-month period ending March 31, 2005 fell 3.9 percent. Bankruptcy cases totaled 1,590,975 for that period, compared to 1,654,847 bankruptcy filings in the 12-month period ending March 31, 2004. Bankruptcy filings remain above the 1.5 million mark first broken in the 12-month period ending March 31, 2002. Non-business filings for the 12-month period ending March 31, 2005 totaled 1,559,023, down 3.6 percent from the total non-business filings of 1,618,062 filings in the 12-month period ending March 31, 2004.   Business filings in the 12-month period totaled 31,952, down 13.1 percent from the 36,785 bankruptcy cases filed in the 12-month period ending March 31, 2004.

Recently released data shows that U.S. credit-card delinquencies fell to their lowest level since 1995 as Americans moved to pay down their debt.The latest data on the $400 billion of U.S. credit-card receivables showed that the proportion of cardholder balances that were more than 30 days late fell to a level not seen in 10 years, according to Moody's. The delinquency rate fell to 4.07 percent in April, down from 4.52 percent a year ago.

Filings fell also under all bankruptcy chapters. Chapter 7 filings dropped 3.0 percent, from 1,176,654 in the 12-month period ending March 31, 2004, to 1,141,715 in the same period in 2005. Chapter 13 filings dropped 5.2 percent, from 465,878 in the 12-month period ending March 31, 2004 to 441,838 in the same period in 2005. Chapter 11 filings fell 38.9 percent, from 11,649 in 2004 to 7,115 in 2005. Chapter 12 filings dropped 67.0 percent from 573 in March 2004 to 189 in March 2005.

BUSINESS FILINGS for the 3-month period ending March 31, 2005, totaled 8,063, down 23.7 percent from the 10,566 bankruptcy business cases filed in the same period in 2004. NON-BUSINESS FILINGS for the 3-month period ending March 31, 2005, decreased 0.9 percent from 397,006 in 2004 to 393,086 in 2005.

The chapter* breakdown of BUSINESS filings for the 3-month period ending March 31, 2005, is: 5,281 chapter 7s, 1,521 chapter 11s, 99 chapter 12s and 1,150 chapter 13s.

The chapter breakdown of NON-BUSINESS filings for the 3-month period ending March 31, 2005, is: 289,239 chapter 7s, 201 chapter 11s and 103,646 chapter 13s.

Districts with the Highest Percentage INCREASE in Total Filings for the 12-month period ending March 31, 2005 (compared to the identical period in 2004):

  1. District of Northern Mariana Islands 60.0%
  2. Western District of  Pennsylvania: 8.0%
  3. District of Colorado: 6.6%
  4. Southern District of Texas: 6.5%
  5. District of Nebraska: 6.0%

Districts with the Highest Percentage DECREASE in Total Filings for the 12-month period ending March 31, 2005 (compared to the identical period in 2004):

  1. District of Nevada 20.6%
  2. Central District of  California 19.2%
  3. District of the Virgin Islands 17.3 %
  4. Southern District of Florida 16.5%
  5. District of Columbia 14.4%

More information will be available on Monday at ABI’s Statistics Page, http://www.abiworld.org/Content/NavigationMenu/Online_Resources/Bankruptcy_Statistics/ABI_-_Bankruptcy_Statistics.htm.

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ABI is the largest multi-disciplinary, non-partisan organization dedicated to research and education on matters related to insolvency. ABI was founded in 1982 to provide Congress and the public with unbiased analysis of bankruptcy issues. The ABI membership includes over 10,900 attorneys, accountants, bankers, judges, professors, lenders, turnaround specialists and other bankruptcy professionals providing a forum for the exchange of ideas and information. For additional information on ABI, visit www.abiworld.org. For additional conference information, visit http://www.abiworld.org/conferences.html.

*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 the debtor’s available non-exempt property.  Unsecured debts not reaffirmed are discharged, providing a fresh financial start.  

Chapter 11 of the Bankruptcy Code is available for both business and consumer 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; it is typically used to budget some of the debtor’s future earnings under a plan through which unsecured creditors are paid in whole or in part.


 

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