The number of bankruptcy filings in northwest Ohio rose again last month — for the third straight month — suggesting the long and often steep decline in new bankruptcies may be coming to an end.
The U.S. Bankruptcy Court in Toledo said it received 355 new filings in October, a 3 percent increase over 2015.
Experts say it’s difficult to draw too much inference from what’s happened in a relatively short term in a single court district, but filings do appear to be leveling off nationally.
“The rate of decline has been slowing down. Filings have been going down for six years now,” said Ed Flynn, a consultant with American Bankruptcy Institute. “They’ve gotten down about half from the peak and it’s pretty much the same thing in Ohio; it’s followed the national trend really closely.”
Mr. Flynn expects the number of filings in Ohio to be about flat this year and increase a bit next year. In Toledo 3,464 cases were filed through the end of October, a 2 percent decrease over the same period last year. The vast majority were Chapter 7 liquidation filings.
Experts floated different reasons for the recent increase, including the high-interest student loans weighing on borrowers and the fact that credit has become more easily obtained, making it more likely for some to get in over their heads.
“People are being given the credit by these banks on credit cards and they get caught up and they can’t pay it and they realize as they’re paying it they’re using it to support themselves and the house of cards collapses,” Toledo bankruptcy attorney Elliot Feit said. “That’s the main reason. I don’t think anything else is causing this.”
According to figures from the Federal Reserve, Americans held $975 billion in revolving debt at the end of August. Nearly all of that debt is credit-card debt. That does not necessarily signal that people are in over their heads, but with more debt out there, there are more chances for issues.
In fact, Mr. Feit said younger credit-card users appear to be more careful not to take on debt they can’t handle. However, many of those same people are saddled with huge amounts of student loan debt.
“Most of the clients we’re seeing are not young people who just got out of school; however the young people we do see are being killed with their student loan debts,” he said.
Scott Ciolek, a Toledo attorney who specializes in bankruptcy law, said he has seen more young people struggling with student loan debt — a situation brought on in part by more aggressive collections efforts.
“We get a lot of inquiries through the website of people looking to file bankruptcy. The old standbys, divorce and medical bills are still major players, but I don’t know that divorce and medical bills are on the rise locally,” Mr. Ciolek said.
Though student loan debt generally can’t be wiped away by a bankruptcy filing, it can sometimes be reduced through Chapter 13 repayment filings, Mr. Ciolek said. Bankruptcy can clear other unsecured debts, potentially making it easier for individuals to meet their student loan obligations.
Whatever the case, experts and attorneys don’t believe the small increase in filings is indicative of any larger structural issue within the local — or national, for that matter — economy.
Contact Tyrel Linkhorn at email@example.com or 419-724-6134.
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