Californian Economic Recovery on the Horizon?

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Bankruptcy data for California | Photo 02

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The most recent bankruptcy data was released and all indications is that California may be turning the corner towards economic recovery.

Two years after the 2008 credit crunch most of the news about the Californian economy was bleak. Consumers were breaking records for Chapter 7 & 13 bankruptcy filings every quarter. Not only were families and individuals suffering, an unprecedented number of cities and counties were and are still mulling the options of declaring Chapter 9 bankruptcy.

Despite bad news the latest data on housing and bankruptcies suggests California is on the road to recovery.

The most recent data released for the 2010 period, and early 2011, indicates that California bankruptcy filings are slowing, and home sales are increasing.

The bar graph above depicts the combination of Chapter 7 and Chapter 13 bankruptcy fillings for each quarter since 2007. The upward trend is clear, but what we find at the end of 2010, despite another record breaking number, (since legislation changed for bankruptcy in 2005), the actual increase from Q4-2010 from Q3-2010 was significantly less. It appears the rate at which Californians are declaring bankruptcy is slowing.

The line graph of the quarterly percentage increase of filings shows us how that number is declining.

The rate of increase between Q3-Q4 was merely 2%, a far cry from the beginning of 2010 where the rate of increase from Q4 2009 to Q1 2010 was almost 20%.

Extrapolating from this data it is safe to assume that by mid-2011 total bankruptcy filings will actually begin to decrease.

Couple this with the fact some cities are already experiencing a decline in filings this year, such as San Francisco and San Diego, and home sales are increasing in these areas, we have amply evidence that California is clawing itself out from the bottom of the recession.

This does not suggest that the economy is comparatively strong as it was prior to 2008, however, it does lend credibility to the notion that the worse may be over for the state.

Note: Data compiled by San Diego Bankruptcy Attorney CC Legal and sourced from RAND California.