Busted

The May edition of Numbers You Need, our monthly update of key Oklahoma economic and budget trends,  includes some recent data on bankruptcy filings in Oklahoma that provides another indicator of the spread of economic hardship in the state. For the fourth quarter of 2008, a total of 2,956 bankruptcies were filed in Oklahoma. This was an increase of 34.2 percent over the same quarter in 2007. For the year, there were 11,214 bankruptcy filings in Oklahoma, a 23.0 percent increase from 2007, which saw 9,122 filings. Nationally, bankruptcy filings rose at a higher rate than in Oklahoma – 31.4 percent in 2008 compared to 2007 – likely reflecting the recession hitting Oklahoma later. National rankings for 2008 are not yet available, but in 2007, Oklahoma ranked 22nd highest among the states, with a bankruptcy rate of 2.44 per 1,000 population.

The data also allow us to separate out business and non-business filings and chapters of the bankruptcy code.  Personal bankruptcies accounted for 95.9 percent of the filings in Oklahoma in 2008, which was a share very similar to the national average of 96.3 percent. Four out of every five filings (79.7 percent) in Oklahoma were filed under Chapter 7, under which a debtor liquidates non-exempt property in exchange for being discharged of some of their debt. One in five (19.8 percent) bankruptcies were filed under Chapter 13, under which debtors are allowed to retain ownership and possession of their assets, but must devote some portion of their future income to repaying creditors, generally over a period of three to five year.  A tiny number of bankruptcies – just 0.5 percent – were filed under Chapters 11 or 12 of the bankruptcy code.

It is difficult to provide a fair comparison of the volume of bankruptcy filings going back multiple years because of the change in the law that took effect in October 2005, which made it harder to file for bankruptcy protection under Chapter 7. The implementation of the new law led to a massive increase in filings prior to the law’s enactment and a corresponding drop in  subsequent months.  The numbers below suggest, however, that over the course of the current economic downturn, the number of bankruptcy filings may return to pre-reform levels of 2002-04.

Bankruptcy ripples through the economy in the form of empty houses, unpaid medical bills, cars that aren’t bought or sold, and jobs that disappear without warning.  We’ll continue tracking these numbers, mindful that bankruptcy affects more of us than just those reluctantly heading off to the courthouse.

Business and Non-business Filings
(Years Ended December 31, 2002-2008 )