North Dakota bankruptcy cases filed in federal court totaled 1,651 in fiscal year 2010 (12-month period ending Sept. 30, 2010), which is up 4 percent from the 1,590 filings in 2009.

This month’s “Economic Brief,” a monthly publication from the North Dakota State Data Center at North Dakota State University, focuses on the number of bankruptcy cases filed by state as reported by the Administrative Office of the U.S. Courts.

North Dakota’s trend in bankruptcy filings closely follows the national pattern of change from the late 1980s through 2007. Bankruptcy filings in North Dakota grew approximately 6 percent per fiscal year from 1987 (1,148 filings) to 2005 (2,878 filings).

On April 20, 2005, President Bush signed into law the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA), which made substantial changes to the bankruptcy code (most provisions took effect in October 2005).

As a result, bankruptcy filings dropped abruptly during 2006 to a low of 1,090 in fiscal year 2007. Since then, national filings have almost returned to pre-BAPCPA levels.

In North Dakota, filings have increased but at a slower pace than the national average.

“The recession may have played a significant role in the rapid rise in bankruptcies,” says Richard Rathge, State Data Center director. “Overall, bankruptcies in the U.S. doubled from 2007 to 2010, the period that roughly frames the major economic recession from which we are still recovering. However, during this period, North Dakota’s bankruptcies increased by half the national rate, which demonstrates how our state was buffered from the recession.”

Nonbusiness filings, which represent the majority of North Dakota bankruptcy cases, totaled 1,586 in fiscal year 2010, which is up from 1,523 in 2009. Business filings for North Dakota totaled 65 in fiscal year 2010, which is down slightly from 67 in 2009.

Total Chapter 7 filings grew 3 percent to 1,460 in fiscal year 2010, which is up from 1,418 in 2009.

Chapter 13 filings for North Dakota grew 10 percent to 181 in fiscal year 2010, which is up from 164 in 2009.

Chapter 7 of the bankruptcy code is available to both individual and business debtors. Its purpose is to achieve a fair distribution to creditors of the debtor’s available nonexempt property. Unsecured debts not reaffirmed are discharged, providing a fresh financial start.

Chapter 13 of the bankruptcy code is available to an individual with regular income whose debts do not exceed specific amounts. It typically is used to budget some of the debtor’s future earnings under a plan through which unsecured creditors are paid in whole or in part.

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