The Elbert Files: What bankruptcies tell us

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I was curious recently when I heard an economist say he would be keeping an eye on bankruptcy filings in 2019. If they start increasing, he said, it would be a sign that the economy isn’t as rosy as some folks think it is.

I learned a long time ago that bankruptcy filings, like farmland values, are a good indicator of Iowa’s economy.

Neither is a leading indicator. It’s more like looking in a rearview mirror. The numbers tell us where we’ve been, not where we’re going. They won’t keep us from driving off a cliff.

Nevertheless, I decided to do a little number-crunching and downloaded data for the past several years from the federal bankruptcy courts that serve Iowa’s Southern (Des Moines) and Northern (Cedar Rapids) districts.

The records show both courts experienced increased workloads during the past two years.

New case filings from both districts were up a combined 1.5 percent in 2017 and 7.8 percent for the 11 months ending Nov. 30, 2018.

Those are not huge increases, and I was inclined to discount them until I noticed that prior to 2017, the number of bankruptcy filings in Iowa had decreased every year since 2010.

During the six years leading up to 2016, bankruptcy filings fell by more than half from 9,729 in 2010 to 4,207 in 2016. The percentage changes were as follows:
• 2011, down 19.2 percent.
• 2012, down 20.1 percent.
• 2013, down 8.1 percent.
• 2014, down 11.3 percent.
• 2015, down 12.9 percent.
• 2016, down 5.7 percent.

Then came the increases in 2017 and 2018.

The change in direction reminded me of the beginning of the 1980s farm crisis. I wrote my first farm crisis story for the Des Moines Tribune in 1980 under the headline: “Economic pinch shows in prices of Iowa farmland.”

A lot of experts said the decline was an aberration, and it took three more years for the problem to be widely recognized.

The farm crisis was caused by a variety of factors, few of which exist today.

The recent increases in bankruptcy filings are also the result of many intangibles.  

The only thing I know for sure is it will be a lot easier to determine the significance of today’s bankruptcy numbers three or four years from now.

Once I had the bankruptcy numbers in a spreadsheet, I played with them to see what patterns might emerge.  

I wanted to see which counties had the highest and lowest per capita bankruptcy filings, so I combined the 2017 and 2018 county-by-county case filings and divided the total by county populations.

The average annual bankruptcy rate for the entire state during those years was 14 bankruptcies per 10,000 people.

When I plotted individual county results on a map, some interesting patterns appeared.

Along much of the northern two tiers of counties, the average was well below the statewide average. Residents of Sioux, Kossuth, Worth and Howard counties filed an average of just five bankruptcies each year per 10,000 people.
Meanwhile, counties in southern Iowa, especially the southeast corner, had significantly higher averages: 25 bankruptcies per 10,000 people in Des Moines County (Burlington), and 19 in both Jefferson County (Fairfield) and Henry County (Mount Pleasant).

There were, of course, exceptions. Clay County in northwest Iowa averaged 18 bankruptcies per 10,000 residents, while Taylor County in the far south averaged only five.

The state’s two most populous counties, Polk and Linn, had midrange per capita numbers, 17 for Polk and 14 Linn, as did many of the middle counties that Interstate 80 and U.S. Highway 30 pass through.