Crescent-News.com - Bankruptcy filings continue to climb

By LISA NICELY
nicely@crescent-news.com
As the economy continues its slump, the number of bankruptcy filings are rising.
Bankruptcies in the region for the first four months of 2008 are 23 percent higher overall than 2007 filings, according to the United States Bankruptcy Court's Northern Ohio District Toledo branch. That branch covers 21 counties, including the six-county Defiance area. While statistics point to more bankruptcy filings, specific figures on individual counties for the first months of 2008 will not be released until August, says the Administrative Office of the U.S. Courts.
Overall, bankruptcy filings increased 47.7 percent in the United States from April 2007 to April 2008, according to the American Bankruptcy Institute.
Those numbers don't surprise many in the credit counseling and bankruptcy fields.
"I don't see an end soon," said Tracie Henney of Community Credit Counseling Specialists, a nonprofit organization which provides budget, debt and bankruptcy counseling and has an office in Defiance. "The main issue is the economy."
Henney said Community Credit wasn't aware of how big a problem many individuals had with their credit and were facing bankruptcy when area offices opened in April 2006.
"It was overwhelming when it first started," said Henney. "We didn't realize the magnitude of people needing assistance. We thought maybe we'd have six (people coming in) a week. Each counselor is doing 20-30 a month now."
Henney said that Community Credit can't help many of the individuals seeking to avoid bankruptcy. Counselors try to get individuals into debt management plans, therefore helping them out of debt. The program includes working with credit card agencies to drop interest rates.
"We establish a budget if we can't get them into the program," she said. "The whole time we've been here, maybe three of them we were able to get in the program. Everyone else is too late. They have to file (bankruptcy)."
Bankruptcy should be a last resort, because it stays on a person's credit record for up to 10 years. In 2005, the Bankruptcy Abuse and Consumer Protection Act was passed, which requires mandatory counseling courses for filing. Credit Counseling and other counseling agencies, provide certified courses.
Henney said people should really seek credit counseling to avoid bankruptcy.
"When you start noticing you have problem with interest rates on credit cards and you can't make payments you should come in," she said.
For awhile, the number of bankruptcies in the region had decreased since 2005.
That was the year the Bankruptcy Abuse and Consumer Protection Act brought many changes to bankruptcy law. Those included requiring individuals, who have the ability, to pay back a portion of the debt. Individuals who make less than their state's median income would not have to repay debts. The law also made it more difficult for individuals to abuse bankruptcy protection. Individuals have to wait at least eight years before they can re-file for bankruptcy.
Looking at bankruptcies in the region, Defiance County had 130 total filings (business and nonbusiness) as of September 2007. There were 289 in the same time frame in 2005.
Other counties had similar results: Henry County, 68 (211); Fulton County, 141 (345); Paulding County, 74 (167); Putnam County, 53 (146); and Williams County, 130 (360).
However, with the economy turning, bankruptcy lawyers and those in the credit field expect those numbers will be rising again.
"The sharp spike in consumer bankruptcies reflects the growing financial stress faced by American families, saddled with household debt and mortgage woes," Samuel Gerdano, executive director of the American Bankruptcy Institute, said in a statement.
Bankruptcy attorney Kristen Stanton of Defiance said she has seen a definite increase in people coming into her office.
"It started to spike in the fall of last year," she said. "It seems primarily because ARMs (adjusted rate mortgages) are coming due. They don't feel like they have the money to pay that."
Stanton also says she doesn't expect to see the number of people filing bankruptcy to drop off either.
"I haven't seen it slow down at all, especially with the housing market, increases in medical costs. Those are the two reasons people are coming in," she said. "People also using credit cards to supplement income. It doesn't seem to be getting better for those coming in to see me."
Defiance attorney John Goldenetz said he also expects to see an increase in bankruptcy filings this year.
"Last year was up quite a bit from '06, but it hasn't reached the level of '05," he said, adding in prior years credit card debit was the cause of most bankruptcy filings handled by his office. "I'm beginning to see more now in the nature of house payment responsibilities that can't be met.
"I would expect to see a greater increase because what we're seeing in the housing market and the price of everything going up."
Wauseon attorney Mark Powers said he's seen an increase in the number of people coming into his office for bankruptcy, too.
"It's been pretty steady this year, quite a bit," he said. "It started picking up last year by the end of the year."
Powers said that spring is a busy time for his office because people use their tax refunds to pay fees associated with bankruptcies. He said the reason many file for bankruptcy is high credit card balances, but there have been some coming in because of foreclosure on their homes.