Thursday, January 12, 2012

Personal Bankruptcy Filings Decline 11.6% in 2011


"Fitch Ratings says personal bankruptcy filings declined for the first time in four years in 2011, as economic conditions improved marginally during most of the year and consumers reigned in borrowing and paid down existing debt. According to National Bankruptcy Research Center figures, U.S. personal bankruptcy filings declined 11.6% from 2010. The results bettered Fitch's more moderate 5% decline forecast for the year. Actual filings fell 176,892 from 1,530,078 in 2010 to 1,353,186 in 2011.

The results helped drive the rapidly improving collateral performance in consumer Asset-Backed Securities (ABS) sectors throughout 2011. Notably credit card chargeoffs, which are directly affected by bankruptcy filings, fell significantly throughout the year, declining more than 37% from year-end 2010 to year-end 2011 (see chart above). Bankruptcy filings typically comprise 20%-30% of credit card chargeoffs while contractual defaults make up the rest.  Lower consumer bankruptcies have a less profound, but still important, effect on auto ABS, given the utility and importance of the car to the borrower. Nonetheless, lower filings do have a positive effect on default frequencies, all else being equal."

MP: The chart above was featured on this recent CD post, and shows that for consumer credit cards, the delinquency rate in Q3 2011 fell for the 9th consecutive quarter to 3.47%, which was the lowest level since a 3.46% reading in the first quarter of 1995, more than 16 years ago (see blue line in chart).  This downward trend in credit card delinquencies to a 16-year low helps explain the significant decline in personal bankruptcy filings last year. 

HT: Robert Kuehl

4 Comments:

At 1/12/2012 10:42 AM, Blogger morganovich said...

i'd be interested to see how that BK rate looks historically. how does that 2011 number compare to, say, 2006 or 7?

it's all well and good to say that your fever dropped 10%, but if the drop was from 103.6 to 103, it would be a bit of a stretch to call you healthy.

 
At 1/12/2012 3:48 PM, Blogger juandos said...

Note the following from something called the Institute for Financial Literacy dated 9/13/'11: Consumer Bankruptcy Filings among College Educated,
High Income Earners on the Increase


Key demographic findings include:

College education doesn't appear to ward off bankruptcy as the rate of degree holders filing bankruptcy increased by 20%;

Bankruptcy filers earning incomes above $60,000 increased their rate of filing by over 66%;

Asian American filings have doubled while Hispanic/Latino filings increased by over 33%;

Americans age 34 and younger decreased the rate of filing bankruptcy by over 30% since 2006;

The Gender Gap in bankruptcy filings is closing;

Americans who are married are more likely to file and represent over 60% of all filings; and
The primary reasons for financial distress include overextension on credit; unexpected expenses, illness/injury and divorce.

 
At 1/13/2012 2:10 AM, Blogger Ron H. said...

juandos: "College education doesn't appear to ward off bankruptcy as the rate of degree holders filing bankruptcy increased by 20%;"

Just as I thought. A college education doesn't make a person smarter, nor is it correlated with common sense.

 
At 1/13/2012 3:47 PM, Blogger juandos said...

"Just as I thought. A college education doesn't make a person smarter, nor is it correlated with common sense"...

Yeah ron h and having a college degree now a days might also be no guarantee a more lucrative job career either...

 

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