WASHINGTON - Bankruptcy filings in the first quarter 2006 dropped precipitously to about a quarter of what they were in the last three months of 2005, according to the Administrative Office of the U.S. Courts.

A total of 116,771 bankruptcies were filed in the first quarter of the year-the lowest level of any three-month period since 1985-compared to 667,431 in the last quarter of 2005, which were inflated due to the Oct. 17, 2005 effective date of the new bankruptcy reform law. The first quarter of 2005 saw 401,149 filings.

Personal filings were up 12.9% during that time while business bankruptcy filings were up 10.5%. Chapter 7s were up 25.4% to 1,432,074, likely because the new law aimed to force filers into Chapter 13, and Chapter 13s were down for the 12-month period by 19.5% to 355,756. Chapter 11 reorganizations were down 8.7% while Chapter 12 (family farm) bankruptcies nearly doubled year-over-year. Credit union specific figures, as calculated by CUNA, showed a 35% increase in filings in 2005 and, annualizing activity so far this year represents a 63% drop. However, CUNA Senior Economist Mike Schenk said that multiplying the first quarter figures by four "is not going to be representative of what's going to happen in 2006." The drop off, he said, is likely because of the rush to file in the last quarter of 2005. In the end, he predicted about a 10% decline in filings across the board, which amounts to about 25,000 filings. "That's not chump change," he said.

The overall drop, however, is not necessarily an indication of how well the new law is working, NAFCU Chief Economist Tun Wai said. "I would say it's too early to tell.We expected filings to pick up in the last quarter and it did. We expected a downturn and it did."

He added that what he found more interesting was that the year-over-year numbers for the 12-month period ending March 31, 2006 were still up 12.8%, from 1,590,975 to 1,794,795. A full-year cycle is when comparisons can be made, which he said is when the post-reform bankruptcy data will be more valuable for pinpointing any trends. "One data point does not make a trend," Wai emphasized. [email protected]