Personal-bankruptcy filings are dropping again this year both locally
and nationally, a trend that started in 2010.
But a bankruptcy expert said the decline shouldn't be seen as a sign that the economy is getting better or that more people are working and making money.
Instead, the decline reflects wary consumers' reluctance to spend and take on debt as they did before the recession, the kind of behavior that pushed them into bankruptcy to begin with, said Sam Gerdano, executive director of the American Bankruptcy Institute, a nonprofit research and education group.
"Deleveraging the household balance sheet makes them less-vulnerable to the need for bankruptcy protection," Gerdano said.
Nationally, about 1 million bankruptcy filings are expected this year, down about 20 percent from 2012, he said. There were about 1.6 million filings in 2010.
In the U.S. Bankruptcy Court for the Southern District of Ohio, filings are down 10.3 percent for the year that ended on June 30, according to court records. In the northern half of the state, bankruptcy filings dropped about 5 percent.
Attribute the decline in filings to a combination of low economic and employment growth coupled with consumers who aren't confident enough in their financial prospects to spend more, Gerdano said.
"Until consumers feel more comfortable about spending and we see a growing economy, bankruptcy filings will be suppressed," he said.
Recent economic data show that consumers are starting to take on more debt to buy cars and homes, but Gerdano said it will be a long time before such purchases translate into bankruptcy filings.
"We don't expect a reversal of the trend of declining bankruptcies," he said.
Cara Hill, the central Ohio division manager of the Apprisen financial-counseling service, said she sees consumers continuing to act cautiously about handling their money since the recession.
More folks are recognizing that pay raises, bonuses and overtime are harder to come by and are learning to live on their base salaries, Hill said.
At the same time, consumers are interested in learning more about avoiding trouble to begin with and banks have stepped up their efforts to help customers better understand how they spend money, she said.
Consumers seem to be trying to take more steps to avoid a bankruptcy filing, Hill said.
"A lot of folks are willing to try and ride it out a little longer."
Also, creditors appear more willing to work with consumers than they were a couple of years ago, accepting partial-payment plans rather than risking the possibility of not recovering any money should the consumer file for bankruptcy, she said.
"It's better to get something than nothing," Hill said.
(c)2013 The Columbus Dispatch (Columbus, Ohio)
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