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"Guesstimate of 2010 Bankruptcy Filings" posted by Bob Lawless at Credit Slips:

http://www.creditslips.org/creditslips/2009/12/guesstimate-of-2010-bankruptcy-filings.html

"How many U.S. bankruptcy filings will there be in 2010? A 'projection' would imply all sorts of careful analysis with regressions and charts. I don't have that, but I do have a guesstimate based on the trends we have seen recently. Last year, I made a guesstimate of a little under 1.40 million bankruptcy filings, and we are going to have 1.45 million bankruptcy filings in 2009. That's not too bad for a guesstimate.

It's probably best to think about the possible outcomes as a range. Right now, bankruptcy filings are running about 6,000 per day. That is an annual filing rate of just over 1.5 million. The rate of increase in bankruptcy filings is falling, but it is unlikely that bankruptcy filings will actually decrease next year. With the last part of 2009 seeing continued declines in the amount of consumer credit, short-term bankruptcy filing rates should increase as consumers run out of the ability to borrow in order to stave off the day of reckoning. In the long-run, the decline in consumer borrowing will have a negative effect on bankruptcy filing rates--if there is less debt, there is less reason to file bankruptcy--but those effects probably won't be felt until later in 2010 or in 2011. It is unlikely that we will have less than 1.5 million bankruptcy filings in 2010.

At the other end of the extreme, we could consider that 2009 will see an annual increase of around 31% in bankruptcy filings, and that increase comes on the heels of annual increases in 2008 of 32% and in 2007 of 28%. Another increase of that magnitude would push total U.S. bankruptcy filings close to 2.0 million. That figure seems unlikely. First, as mentioned above, the rate of increase in the U.S. bankruptcy filing rate is declining--the last few months have seen the lowest year-over-year increases using exclusively post-2005 law data. Second and even more compellingly, U.S. bankruptcy filings capped out at around 5.6 to 5.7 per 1,000 persons in 2003. (I'm not counting the anomalous year of 2005 when the law was changed.) based on the current U.S. population, that would mean a filing rate of around 7,000 per day or about 1.75 million annual U.S. bankruptcy filings. Given the current rate of bankruptcy filings and given that the 2005 bankruptcy law made it more expensive to file bankruptcy (both in terms of financial cost and hassle), it is unlikely that the filing rate would explode past historical caps."

Ironically enough, more and more folks who are prime bankruptcy candidates simply can't afford to file. Also, the complexity of bankruptcy laws and procedures is like the IRS tax code and simply can not be adequately understood by the average consumer or taxpayer.

Worst of all, some folks that file bankruptcy are finding themselves going right back into debt trying to survive and go forward in life in the midst of the failing U.S. economy - and this will produce financial chaos over the next several years as just about everyone chases dollars that aren't there.

- Ed Smith, Publisher
The EHS Letter Manual