The number of bankruptcy cases filed in Buffalo and Rochester last year declined nearly 10 percent from 2012, the fourth consecutive year the total has dropped.
The U.S. Bankruptcy Court for the Western District of New York said 343 cases were filed in December, a 14.3 percent decline from a year earlier. That total was the smallest for any month since December 2005.
The downward trend has been a staple of area bankruptcy filings for a few years. In 2013 alone, there were year-over-year declines for 10 of the 12 months. And the number of cases filed for the full year, 5,589, was down 75 percent from 2005, the year that stricter rules about filing went into effect, and filers rushing to beat the deadline created a surge in the numbers.
Bankruptcy attorney Jeffrey Freedman said a significant reason for the decline in cases since 2009 is credit being extended to a smaller number of people. “The people that are getting credit are using it more responsibly,” he said. Freedman said many of the cases his office handles stem from high medical bills, layoffs from jobs and divorces.
Credit counseling agencies are helping people in financial trouble come up with solutions apart from bankruptcy filings, he said, and even some of the clients who come to Freedman’s office have been able to negotiate agreements with creditors instead of going the bankruptcy route.
Paul Pochepan, an attorney with Tully Rinckey, said people have found ways to avoid falling deeply into debt in the post-recession years, accounting for the decline in bankruptcy cases. Some of them are refinancing their mortgages to take advantage of favorable interest rates, and even some people who have lost jobs are not rushing to file for bankruptcy as their first option for dealing with their financial woes.
Freedman said there is another dimension to the drop-off in bankruptcy cases, one that impacts the economy more broadly: “I think (lenders) have turned off the credit spigot so tightly that a lot of people who would spend and repay have been shut out of the credit market.”
Pochepan said it is possible that if the economy strengthens and consumers start to spend more freely, the number of filings could rise.
Of the 343 cases filed in Buffalo and Rochester in December, 63 percent were in the Buffalo division, and 37 percent were in the Rochester division. For the entire year, 65 percent of the cases were from the Buffalo division.
In all of 2013, 71 percent of the Buffalo/Rochester cases were Chapter 7 filings. Under Chapter 7, debtors can liquidate their assets to pay off debts and then erase any remaining amounts owed so they can start over.