CREDIT CORNER

BANKRUPTCY FILINGS

 

- Administrative Offices of the US Courts

 

 

Bankruptcy Filings Hit Fiscal Year Historic High in 2002

The number of bankruptcy filings in the federal courts in fiscal year 2002 broke records again, and with no new bankruptcy judgeships and funding frozen, the Judiciary is struggling to handle the caseload.  According to the Administrative Office of the US Courts, more bankruptcies were filed in the 12-month period ending September 30, 2002 than at any time in history.  Bankruptcy cases for FY 2002 totaled 1,547,669, up 7.7% from the 1,437,354 bankruptcy filings for FY 2001.  The 2002 Fiscal Year bankruptcy filings total breaks the record just set in the 12-month period ending June 30, 2002, when bankruptcies totaled 1,505,306.  Non-business or personal bankruptcy filings, which make up the majority of bankruptcy filings, also broke records with a total of 1,508,578, up 1.5% from the fiscal year 2001 filings.  Business filings in the 12-month period ending September 30, 2002, total 39,091, up 1.6% from the same period.  The Judiciary’s fiscal year is the 12-month period from October 1 through September 30.

 

Caseload Soars, No Relief in Sight

The caseload of bankruptcy judges has increased 59% in the past decade with the rise of bankruptcy filings.  The average number of cases handled per bankruptcy judgeship has gone from 2,998 in 1992 to 4,777 in 2002.  The Judiciary has requested new bankruptcy judgeships to handle the expanding workload, but no new bankruptcy judges have been added to the federal bench since 1992.  The Judiciary is handicapped further by the current long-term continuing resolution.  Until Congress passes the Judiciary FY 2003 appropriations bill, court unites must function at rates of operation no more than 95% of their fiscal year 2002 levels.  No budget relief- or room to address the record growth in bankruptcy filings – can be considered until Congress returns next year.

 

Filings Under Chapters 7, 11 and 13 Increase

In fiscal year 2002, filings under all chapters of the Bankruptcy Code increased, with the exception of Chapter 12 filings.  The number of Chapter 7 filings rose 6.9% from the previous fiscal year to 1,084,336.  Chapter 13 filings rose 9.5% to 451,258.  Chapter 11 filings rose 10.9% to 11,669.  Chapter 12 filings fell 15% to 322.  Chapter 7 is designed to allow individuals to keep certain exempt property while the remaining property is sold to repay creditors.  Under Chapter 13 bankruptcy, creditors may be repaid in installments, in full or in part, over a 3- to 5-year period.  Chapter 11 provides for a business to continue operations while formulating a plan to repay its creditors.  Chapter 12 is designed to meet the needs of financially distressed family farmers.

 

Fourth Quarter Filings

The number of bankruptcy cases filed during the fourth quarter of the Judiciary’s fiscal year (July 1, 2002 – September 30, 2002) totaled 401,306.  The number of bankruptcy cases filed during the third quarter of the Judiciary’s 2002 fiscal year (April 1, 2002 – June 30, 2002) totaled 400,686.  The number of bankruptcies filed during the second quarter of fiscal year 2002 (January 1, 2002 – March 31, 2002) was 379,012.  Filings for the Judiciary’s first quarter of 2002 (October 1, 2001 – December 21, 2001) totaled 364,921.