December 2006

Bankruptcy Filings Decline in FY 2006

Bankruptcy cases filed in federal courts tumbled in fiscal year 2006. Filings for the 12-month period ending September 30, 2006, fell 37.6 percent to 1,112,542, from total filings of 1,782,643 in FY 2005. The federal Judiciary’s fiscal year is the 12-month period ending September 30. The bankruptcies reported are for October 1, 2005 through September 30, 2006.

The FY 2006 figures include most of the filings that were part of the surge in filings prompted by the October 17, 2005, implementation date of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005; filings began to rise in late FY 2005 and peaked as over 600,000 petitions were filed in the first 16 days of October 2005.

Business, Non-Business & Chapters

Business bankruptcies for FY 2006 fell 20.1 percent to 27,333 from the 34,222 business bankruptcies filed in FY 2005. Non-business or personal bankruptcies fell 37.9 percent in FY 2006, from 1,748,421 in FY 2005 to 1,085,209 in FY 2006.

In FY 2006, filings under Chapters 7, 11, and 13 of the Bankruptcy Code fell, while filings under Chapter 12 rose slightly. The largest decline was in Chapter 7 filings.

• Chapter 7 filings in FY 2006 totaled 833,147, down 38.1 percent from 1,346,201 in FY 2005.
  
• Chapter 11 filings dropped 9.6 percent, falling from 6,637 in FY 2005 to 6,003 in FY 2006.
  
• Chapter 13 filings declined 36.4 percent, falling from 429,316 in FY 2005 to 272,937 in FY 2006.
  
• Chapter 12 is designed to meet the needs of financially distressed family farmers. In FY 2006, Chapter 12 filings totaled 376, up 3.3 percent from the 364 cases filed in FY 2005.

Fourth Quarter Filings

Filings for the Judiciary’s fourth quarter, the 3-month period ending September 30, 2006, fell to 171,146, down 68.4 percent from the 542,002 bankruptcy cases filed in the final quarter of FY 2005.

Implementation of Bankruptcy Act Strained Judiciary

In early December 2006, an oversight hearing on the implementation of the Bankruptcy Abuse Prevention and Consumer Protection Act was held by the Senate Judiciary Committee Subcommittee on Administrative Oversight and the Courts. Judge Thomas S. Zilly (W.D. Wash.), chair of the Judicial Conference Advisory Committee on Bankruptcy Rules, submitted a statement on behalf of the Conference.

Zilly said that implementing within six months the provisions of the Act, which exceeds 500 pages and affects virtually every aspect of bankruptcy cases, had presented the federal Judiciary with “an unprecedented challenge.” The Judiciary met the challenge, Zilly told the subcommittee, despite the immense amount of work and cost involved. He noted that a major segment of the federal Judiciary was required on a short timetable to modify or develop new rules, forms, court procedures, computer software programs, statistical reports, manuals, and training programs and to address a host of other tasks.

“The added demands of the Act have increased the already enormous pressures to cope with the day-to-day responsibilities in the administration of justice,” said Zilly, “straining the federal Judiciary’s personnel and resources.” Zilly’s complete testimony is on-line at www.uscourts.gov/newsroom/judgezilly.pdf.

For more on bankruptcy and its chapters, see the Judiciary’s “Bankruptcy Basics” at www.uscourts.gov/bankruptcycourts/bankruptcybasics.html or visit www.fjc.gov/federal/courts.nsf. Local bankruptcy court rules can be found at www.uscourts.gov/rules/bk-localrules.html. Historic data on bankruptcy filings is available on www.uscourts.gov/bnkrpctystats/bankruptcystats.htm. Additional bankruptcy statistics, including bankruptcies by county, can be found on the Judiciary’s PACER system.