The Administrative Office of the United States, which is responsible for keeping track of such things, has just released the latest bankruptcy filing statistics. The figures, which cover the period ending June 30, 1999 show some notable trends and contain information relevant to our local area.

The good news for Californians in general and residents of the Los Angeles/Orange County area in particular, is that compared to the same twelve month period in 1997/1998, the total number of bankruptcy filings in California is down slightly over 5%.

The bad news is that California, and the Central District of California in particular, continue to lead the nation in bankruptcy filings by a huge margin.

The Central District is a Federal Court District compromised of Los Angeles, Orange, San Bernardino, Riverside, San Luis Obispo and Ventura Counties. Of the 200,186 bankruptcies filed in California in the twelve months ending in June of 1999, 113,653 were filed in the Central District. This compares with 211,335 in the State and 119,776 in the Central District for the same twelve month period ending in June of 1998.

If the number of filings seems high - even with the decrease-- it is because it is. In fact, the number of filings in the Central District exceeded the filings in 7 of the 11 Federal Circuits (a Circuit is usually made up of at least three states and some are considerably larger). By way of comparison, the number two district in the United States in total number of filings was Northern Illinois where 46,874 petitions were filed - almost a third less than in our own district.

Why the filings in California are so high is not easy to understand. Browsing statistics available from the U.S. Census Bureau (www.census.gov), you can find that the poverty level in California is high (about 16% of the population) but not as high as many areas. In fact, the California poverty level is about the same as that of New York but Eastern New York was only tenth on the national filing list with 26,936.

Of course, population has something to do with the total number of filings ( number two Northern Illinois, includes Chicago) but, again, New York ranks tenth and Southern California is twenty-fourth. Middle Florida, which is not as populated, is third on the list.

One factor which does seem to correlate with the filing volume is median income. Five of the top six filing districts are in states with median incomes over $40,000. In fact, New Jersey (fourth in filings) and Maryland (sixth) have the highest median incomes among the contiguous states at $49,303 and $47,711 respectively.

It has been suggested that areas with high income encourage small business ventures and that these account for many of the bankruptcy filings. Statistics that would show that do not seem to be available however.

Anyone with a good explanation for central California's dubious distinction is certainly welcome to email or write me with the answer.

Some consolation can be taken from the fact that the number of filings did decrease here. At least we are not in the position of the District of Northern Marianas Islands where the filings more than doubled last year - rising from eight to eighteen.

January 2000.
Reprinted with permission of the The Orange County Register.