The Data-Driven 2022 Bankruptcy Recap

Our annual bankruptcy recap is here! With data on 378,095 cases filed in 2022, there are a lot of interesting trends. Let's jump into the data to provide insight into the most memorable bankruptcy events, highlight some interesting statistics, and reveal the latest innovations in the bankruptcy space.

No Bankruptcy Storm Yet

Bankruptcies ground to a halt during the pandemic, with fewer bankruptcy filings than at any time since the Great Depression. The drop in filings defied predictions by economists who had expected an avalanche of consumer and business filings. Stimulus checks put money in people's pockets, moratoria postponed rent and mortgage payments, unemployment funds provided income to those without a job, low-interest rates kept businesses afloat, and debt relief programs provided repayment plans. Bankruptcy filing numbers still haven't recovered from the pandemic. Overall, 2022 bankruptcy filings were 5.77% below 2021 and 50.0% below 2019 levels. However, there is a marked shift in the type of filing that impacts lenders' ability to recover bankruptcy debt.

From 2021 to 2022, the districts that saw the sharpest rise in bankruptcies are the traditionally heavy Chapter 13 districts. The Northern District of Mississippi saw a 38.0% increase in filings, followed by the Western District of Tennessee with a 33.4% increase and the Western District of Louisiana with a rise of 30.9%. The filing increase in these districts was the result of increased Chapter 13 filings.

Turning the Corner

At the start of 2022, we had a conversation with Senior Economist for the US Courts, William Rule. He thought that the economy would experience withdrawal symptoms as interest rates rise and businesses lose access to easy money. He predicted that filings would remain suppressed for the first two quarters of 2022 but would see YOY growth in the later half of the year.

In August of 2022, we saw William's predictions come to life. Bankruptcy filings spiked 11.8% from July to August of 2022. This represented a deviation from the recent norm of filings decreasing from July to August. In 2021, August filings decreased by 0.4%. In 2020, August filings decreased by 8%.

This trend of YOY growth continued for the rest of 2022. Filings through the end of the year were higher than 2021 levels for nearly every week.

Massive Chapter 13 Growth

The ratio between chapters 7 and 13 has always been an indicator of broader market conditions. During 2022, there was a 34.2% YOY increase in Chapter 13 filings, which accounted for the overall YOY increase in filings in the latter half of the year. Two market trends drove this increase: (1) asset equity increased during the pandemic causing filers to favor a Chapter 13 bankruptcy where they can restructure their debt to leverage their equity, and (2) bankruptcy attorneys get paid (sometimes 3-5x) more for labor-intensive Chapter 13 cases. This actively incentivizes attorneys to push Chapter 13 filings when the bankruptcy market is slow.

This Chapter 13 growth is good news for savvy lenders who are smart about their approach to bankruptcy filings. Chapter 13 cases with equity are prone to pay more through their bankruptcy. Lenders can leverage the court as their collection agency and often recover more in a Chapter 13 case than they would have collected without a bankruptcy filing. BankruptcyWatch provides a way to detect, respond to and track bankruptcy filings, giving lenders more power in the process.

Districts that aren't traditionally Chapter 13 heavy districts led the sharpest rise in Chapter 13 filings. The Eastern District of New York exploded with an increase of 430.3%, and the Southern and Northern District of New York trail right behind in the top 5 districts with a YOY Chapter 13 increases. The heat map for Chapter 13 filings looks very different than the heat map for all filings.

Top 5 Bankruptcy Creditors

We work with a wide variety of creditors, and we've noticed that some of our medium-sized users will encounter as many bankruptcies as the largest ones. Out of interest, we sampled 700,000 docket items, and these are the creditors with the largest number of bankruptcy responses we found:

1. Capital One
2. IRS
3. Portfolio Recovery Associates LLC
4. LVNV funding LLC
5. Synchrony bank

Top 5 Bankruptcy Cars

We were excited to include the top 5 cars in bankruptcy, but alas, our 700,000-docket sample didn't have any supercars or other wild modes of transportation. The list of the top 5 cars was dominated by Japanese sedans. Let's take a look:

1. Toyota Camry
2. Nissan Altima
3. Honda Civic
4. Ford Fusion
5. Toyota Corolla

Interesting Bankruptcies

1. FTX

FTX announced that it is filing for bankruptcy, which has caused a stir in the cryptocurrency industry, raised questions about its credibility, and prompted government investigations that could potentially result in further revelations or criminal charges. This event has prompted corporate drama that has had a significant impact on the crypto market pushing hundreds of crypto companies to the brink of bankruptcy.

2. BlockFi

BlockFi, a distressed cryptocurrency company, has filed for Chapter 11 bankruptcy in the US Bankruptcy Court for the District of New Jersey. The filing revealed that the company has more than 100,000 creditors and liabilities and assets ranging from $1 billion to $10 billion. BlockFi also listed an outstanding loan of $275 million to FTX US.

3. Alex Jones

Alex Jones, the founder of Infowars, filed for bankruptcy. The filing stated that Jones has between $1 million and $10 million in assets and between $1 billion and $10 billion in liabilities. This comes less than two months after Jones and his parent company, Free Speech Systems, were ordered by a Connecticut jury to pay nearly $1 billion in damages to the relatives of victims of the 2012 Sandy Hook mass shooting.

2022 for BankruptcyWatch

In 2022, we made a goal to make bankruptcy processes easy for lenders. We launched several exciting projects to support our initiative:

1. Scrub Platform Case Monitoring & Claims Filing

The BankruptcyWatch Scrub platform added capabilities to monitor cases and file claims. Small, medium and large lenders are centralizing and improving their bankruptcy operations with the easy-to-use interface. We've been using the improved Scrub Platform to help lenders modernize their bankruptcy processes. In initial meetings, we help lenders evaluate the best practices and walk them through the systems. Learn more in our blog post or by scheduling a demo.

2. MatchConsumer API Operation

We created a new service that leverages our latest machine learning technology to accurately match consumers to bankruptcies without any social security information. The operation was quickly implemented by lenders and insurance companies to locate bankruptcies on a massive scale without sharing sensitive PII. The operation also makes it easy and inexpensive for underwriters to filter applicant bankruptcy statuses before they pull credit reports for more accurate and quicker decision waterfalls. Read more on our API product page.

3. Scrub Platform API Sync

BankruptcyWatch is an API-first solution, so connecting our platform to the API was a no-brainer. The API connection allows lenders to automate the mundane parts of loan servicing (adding/removing consumers) while giving servicers a platform to organize filing notifications, monitor cases, file claims, and track the whole process. Read more on our Scrub product page.

4. Defi integration

During 2022, we helped bring bankruptcy data to our clients by adding integration with Defi. Top bankruptcy-tolerant auto lenders use the integration to streamline the process of reviewing active bankruptcy applications. Tools like BankruptcyWatch document parsing allow lenders to parse and automatically make lending decisions bringing application review time from 30 minutes to 2 minutes. Get a demo of the tools by requesting a demo.

5. NLS Integration Improvements

A live PACER Case Locator search is now available within the NLS platform. In addition to the already-thorough and robust bankruptcy management system natively available within NLS, this allows users to immediately and automatically see exactly what the court knows about any applicant, borrower, or case. Learn more about the integration on the Nortridge bankruptcy page.

6. Freelooks for Lenders

Paying for court documents is what dinosaur lenders do. One of our goals for 2022 and beyond is to help lenders get documents for free by automating the enrollment and collection of PACER Freelooks for creditors. Over the year 2022, we've gathered hundreds of thousands of dollars worth of Freelooks using these tools. Lenders who are wasting money on bankruptcy documents should contact us to join our beta program to save money ASAP.

7. No-Code Integrations

We are making our powerful API available through no-code tools. Connect PACER data to a spreadsheet, file claims through Zapier, automate Jira workflows, and more. Fill out our No-Code beta form to join the waitlist.

8. Bankruptcy Statistics

Due to popular demand, we launched a new page to share real-time bankruptcy statistics to help you make better business decisions faster. Bookmark the BankruptcyWatch Data & Statistics today to access real-time bankruptcy statistics whenever you are interested.

9. Improved Bankruptcy Lists

We've added a heap of new data points to our bankruptcy lists. Get custom bankruptcy lists with case details, party contact information, and asset descriptions for every case in the US. Filter by location, chapter, outcome, event, timeframe, business type, and more. Learn more on our Bankruptcy List product page.