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67 Am. Bankr. L.J. 1 (1993)
The Increasing Bankruptcy Filing Rate: An Historical Analysis

handle is hein.journals/ambank67 and id is 9 raw text is: The Increasing Bankruptcy Filing Rate: An Historical Analysis* by Jagdeep S. Bhandari** and Lawrence A. Weiss*** I. INTRODUCTION The number of bankruptcy filings in the second half of this century has exploded from approximately 18,500 in 1950 to 943,987 in 1991. The growth in the number and rate of bankruptcy filings has been accompanied by an equally dramatic rise in debt. Total household debt rose from $71.2 billion in 1950 to almost $4.1 trillion in 1991, and total nonfinancial corporate liabilities grew from $125.6 billion in 1950 to just over $3.4 trillion in 1991. This increased number of bankruptcy filings has been blamed on numer- ous factors including easy credit, which resulted in an increase in personal and corporate debt, and the change in bankruptcy laws. However, there has been little or no econometric support for this view. This study examines how a num- ber of economic variables are related to the per capita bankruptcy filing rate for consumer2 and business bankruptcies over the period of time since World War I. We found a positive correlation between debt and the bankruptcy rate and a negative correlation between income and the bankruptcy rate-as expected. We also found that this relationship became more sensitive after the enactment of the Bankruptcy Code, which took effect in 1979. For every percentage *We gratefully acknowledge financialsupport from the National Conference of BankruptcyJudges Endow- ment for Education. We would like to thank Gordon Bermant, Judge Samuel L. Bufford, Judge Glen Clark, Edward Flynn, PremJain, Ronald Lease, Fletcher Mangum, Russ Robbins, Elizabeth Tashjian, and Michelle White for their comments and suggestions. We owe a special debt toJudge Joseph Cosetti for his encourage- ment and continued support. The usual disclaimer with respect to all remaining errors naturally applies. * Scaife Professor of Law, Duquesne University. * Assistant Professor, A.B. Freeman School of Business, Tulane University. 'The number of bankruptcy filings was obtained from the Administrative Office of the United States Courts (AO). Total household debt and nonfinancial corporate liabilities was obtained from the Federal Reserve Board. 21n this article we use the term consumer bankruptcy to refer to cases that are not identified as busi, ness bankruptcy cases in the reporting of the bankruptcy courts to the AO.