Bankruptcy Index

17 02 2010

In the spirit of the highly successful University of Oregon Index of Economic Indicators, I decided to start work on an Oregon Bankruptcy Index.

The goal of this index would be to provide a summary of the vast available economic data as it pertains to bankruptcy filing and bankruptcy risk in Oregon.

The method behind this index might gauge unemployment levels, interest rates, business loans, and other economic criteria.  The data I review and include will depend highly on how my econometric analysis from earlier posts turns out.  Data with a large correlation would be prime for more research and possible addition into the index.  A solid index of numbers might then allow for prediction of future bankruptcy filings.

The obvious benefit of this index could be for real estate companies, banks and investors.  The index might help gauge economic and legal/litigation risk levels.  After the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, bankruptcies went down significantly only to rise up slowly towards the current economic downturn.  Bankruptcy lawyers have learned the law and are now better at getting their clients though the new regulations with five years of experience against the 2005 legal changes.  The index might be able to include and factor in such changes in the regulatory environment.

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Bankruptcy Charts

25 01 2010

Below are early graphs of my Bankruptcy data project.

The data seems pretty straight forward at first.  Bankruptcies slowly climb upward from early 2008.  Divorces stayed fairly steady and the Federal funds rate and employment statistics are too small to contribute significantly to this chart.   However the next chart examines the same numbers with the log value of each one.

Notice the complete collapse of the Fed rate.  This is in connection with the economic recession and intended  lowering of interest rates.  The log version shows the Bankruptcy and Divorce data almost converging.    It will be interesting to see how the regression analysis runs with this data.

The data is from the following sources:

http://www.bankruptcy-statistics.com/ (Bankruptcy numbers)

http://www.dhs.state.or.us/dhs/ph/chs/data/div.shtml (Divorce numbers)

http://www.bls.gov/ (Unemployment Numbers)

http://www.newyorkfed.org/markets/omo/dmm/fedfundsdata.cfm (Federal Funds Rate)





Bankruptcy Surge

5 01 2010

http://www.huffingtonpost.com/2010/01/04/bankruptcies-surge-32-per_n_410824.html

I copied relevant portions of the text from the article above below.  There is some really good analysis of the 2005 Bankruptcy law.  John Pottow, the bankruptcy professor from the University of Michigan is correct in his points that the law just made more paperwork while not changing the dynamics of people in serious debt.

Its also really fascinating that Alaska and Nebraska, the states with the lowest bankruptcy increases saw bankruptcies grown by 12%.  Thats still a big jump in bankruptcies.

“For three years, filings have been steadily rising back toward levels reached early in the decade before Congress overhauled the nation’s bankruptcy laws. The 2005 alterations made bankruptcy filings more cumbersome, a move that followed fears from lenders that some consumers were abusing the system to wipe away debts.

Bankruptcies surged to slightly more than 2 million in 2005 as consumers rushed to file before the new law took effect but then plummeted to 600,000 in 2006. They’ve been climbing ever since and in 2009 became the seventh-highest year on record, behind only the years 1998 and 2001-2005.

The 2005 spike had been preceded by a steady climb from 1.5 million in 2001 to 1.6 million in 2005.

John Pottow, a bankruptcy professor at the University of Michigan, said the return to the highs of earlier this decade illustrates the failures of the 2005 overhaul bill. He said the measure largely made filings more costly and time-consuming by forcing consumers to undergo a paperwork-heavy test to determine eligibility for Chapter 7 bankruptcy and adding liability for attorneys who provide help.

“It never made sense in the first place that you could change the laws and make all these bankruptcies go away,” said Pottow, who would like to see the 2005 law changes repealed. “If people are encountering financial distress, you can only scare them away for so long before they come back again.”

While every state saw a rise in bankruptcies, Alaska (up 12 percent), Nebraska (12 percent) and North Dakota (14 percent) performed best.”








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