Slow business for Southern California bankruptcy courts is good news for the local economy.
Local individual and business bankruptcy filings started 2018 with the seventh-consecutive, year-over-year decline to the slowest pace in 11 years.
There were 8,815 bankruptcies in 2018’s first three months vs. 9,416 in the previous year — a 6.4 percent decline, according to the American Bankruptcy Institute. The tally of filings in U.S. Bankruptcy Court’s Central District for California covers Los Angeles, Orange, Riverside, San Bernardino, Santa Barbara, Ventura, and San Luis Obispo counties.
Despite some headline-grabbing corporate bankruptcies — including some major retail chains — my trusty spreadsheet tells me the regional filing dip follows national declines. In 2018’s first quarter, 187,331 bankruptcies were filed nationwide vs. 195,283 in 2017 — a 4.1 percent decline. Statewide filings — 16,351 in the year’s first three months — were down 6 percent, the 15th best performance among the states.
Bankruptcy patterns are a good marker of financial distress, and too often folks forget how bad things got in and around the Great Recession of 2009-2010.
Southern California bankruptcies soared even before the downturn’s full force hit. Heavy borrowing by consumers and corporations alike during the last decade’s property-fueled boom that ran to 2007 became overwhelming financial burdens after the real estate bubble burst.
As a result, Southern California’s first-quarter bankruptcies surged to 35,046 in 2011 from 6,768 in 2007 — a 418 percent increase, the largest among the nation’s 93 bankruptcy court districts. The region was by no means alone in a bankruptcy surge: U.S. filings rose by 91 percent in those same four years.
The ensuing economic rebound made a huge dent in bankruptcy filings. Southern California’s 2018 first-quarter bankruptcies are off by 75 percent since 2011, the second-largest decline in the nation after California’s northern court district. U.S. bankruptcies fell 48 percent in the same period.
Or look at the improvement in local bankruptcies this way: In 2018’s first quarter, 5 percent of all U.S. filings were in the Southern California court district. Back in 2011? 10 percent!