The number of bankruptcies filed in the first nine months of the year fell to a third of what they were last year, one result of a landmark law enacted in October 2005.
From January to September, the total number of personal and business bankruptcies fell by 68.5 percent to 443,750 from the 1.41 million in the same period last year. This year's figure is the lowest since 1987.
"Today's numbers confirm that we are seeing filing levels not present since the 1980s," said Samuel Gerdano, executive director of the American Bankruptcy Institute, in a statement. "Congress clearly wanted to reduce filings, but only time will tell if the 2006 trend is sustainable."
The data, from the Administrative Office of the U.S. Courts, shows that personal bankruptcy filings fell most sharply, by 69 percent, while commercial bankruptcies fell 45.9 percent. The tally of personal bankruptcy filings fell to 429,522 from 1.38 million last year. Business filings fell to 14,228 from 26,275.
The Bankruptcy Abuse Protection and Consumer Protection Act of 2005, enacted on Oct. 17, 2005, was seen by many as being more friendly to creditors over debtors. In anticipation of the law, bankruptcy filings spiked ahead of its implementation. That leads some bankruptcy experts to ask whether filings will gradually creep back up over time.
Gerdano said bankruptcy professionals are certain they will. In the weeks before the law's enactment, about 600,000 bankruptcy cases were filed, as consumers and businesses raced to seek court protection under the old law. This, Gerdano said, distorts the 2005 numbers, but taking into account historic trends, this year's number is still likely lower than it would have been last year without the surge in activity.
"We're dealing with the wake of the tsunami," Gerdano said. "The water level hasn't gone back yet to something that is normal. We really won't know that until sometime next year. If we get into middle of next year and look at the trendline for the cases, then I think we'll have something approaching the new normalcy."
The act also shifted the type of cases that are filed. The law effectively increased the number of consumer Chapter 13 filings to 41.4 percent of filings from 22.8 percent the prior year, while Chapter 7 filings fell to 58.5 percent of the total from 77.2 percent in 2005. Under Chapter 13, a debtor typically plans to use future earnings to pay back creditors.
The circuit court districts with the highest percentage decreases in the 12 months ended on Sept. 30, compared with the same period ending in 2005, were: the Eastern District of Louisiana, 51.8 percent; the District of Utah, 51.4 percent; the District of Arizona, 50.9 percent; the District of New Mexico, 49.1 percent, and the Northern District of West Virginia, 45.8 percent.