Bankruptcy filings in federal court in Toledo fell 12 percent in 2014, the fifth straight year of declines.
There were 4,603 cases filed in the court, which covers 21 counties in northwest Ohio. That was the lowest total since the 3,837 cases filed in 2006 — the year after bankruptcy reform in the United States took effect. It was also the first time that filings slipped below the 5,000 mark since 2006.
Case filings declined every month in 2014 compared with the same month a year earlier. The last time that occurred was 2011.
Chapter 7 liquidation filings dominated the caseload with 4,185 petitions, a decrease of 12 percent from 2013. There were 409 Chapter 13 repayment cases filed, a decline of 6 percent. There were just 8 Chapter 11 reorganizations cases and one Chapter 15 international bankruptcy case filed in the Toledo court.
After logging a record 16,883 cases in 2005, a year when people in financial distress inundated the bankruptcy court with filings ahead of changes to the federal bankruptcy code, filings dropped, then began rising until they peaked in 2009 at 8,913 cases filed.
They have steadily declined ever since, at one point going 17 straight months without registering an increase from a year earlier.
Continuing declines in the number of bankruptcy cases filed might lead some to conclude that northwest Ohio has an improved economy and that fewer people are struggling with debt.
But two local bankruptcy experts said those conclusions are not necessarily correct.
Kara Bruce, a University of Toledo professor of bankruptcy law and the 2013 resident scholar for the American Bankruptcy Institute in Washington, said that tighter credit markets following the 2009 recession have made bankruptcy irrelevant for many people who struggle financially.
“There has been continued limited access to credit for many people,” she said. “If you have no access to credit, you can’t get into debt.”
Toledo bankruptcy attorney Stephen Priestap agreed.
“Some of the drop in filings is that so many people filed bankruptcy eight or nine years ago, and you also have some population loss. But a lot of it is people don’t have as much credit card debt as before because the credit markets are tighter,” he said.
“As the credit markets have gotten tighter, it has become harder to get loans, harder to get credit cards, and harder to get mortgages for many people.”
Mr. Priestap added: “It’s ironic, but if the economy would pick up, you’d probably have more bankruptcy filings because you’d have more people with more income and the ability to get themselves into financial trouble.”
Ms. Bruce said that while household debt is lower, student loan debt is becoming quite a problem.
But that is not affecting bankruptcy filings because student loan debt cannot be discharged under bankruptcy law, making bankruptcy unavailable to many who could be helped by it.
“I keep saying that student loan debt is going to be the next bubble,” Mr. Priestap said.
“At some point it’s going to be a big problem. You can’t get out from under it under any circumstances, unless maybe disability, and even then it’s really difficult.
“You pretty much have to prove you’re unable to work under any circumstances.”
Contact Jon Chavez at: email@example.com or 419-724-6128.
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