In the period of fiscal 2011, which spans October 2010 through September 2011, bankruptcy filings declined by eight percent. The quantity of bankruptcies remained high in real numbers at 1.47 million bankruptcies, but nonetheless this represented a drop in the number of filings. Experts observed that more consumers have worked on reducing their debt. The reason for fewer business filings is less clear, but still welcome news for the economy.

In the first nine months of 2011, business bankruptcy filings went down by 18 percent compared to 2010. Individuals typically file under Chapters 7 or 13, and businesses typically use Chapters 7 or 11. However, businesses could potentially file under Chapters 7, 11, 12 or 13. 

Looking at just the period of January to September, 2011, Cincinnati Chapter 7 bankruptcy attorneys noted that consumer bankruptcy filings fell by 11 percent. "Consumer filings" refers to bankruptcy filings by individuals. Debtors who file under Chapter 7 go through what is traditionally associated with the term "bankruptcy" by most laypeople. Under Chapter 7, the debtor keeps certain exempt assets, and then the non-exempt assets are sold. The creditors are paid with the proceeds of the sale, and any remaining debts are discharged, meaning they never have to be paid.

The other typical type of consumer bankruptcy is under Chapter 13. Under this chapter, the debtor keeps all of their property. They agree to make a repayment plan to pay off their debts, frequently over a period of a few years. In some cases, some debts may eventually be discharged.

Source: Bloomberg Businessweek "Bankruptcies Fall 8% in Fiscal 2011 on Lower Debt, ABI Says" Nov. 8, 2011