Bankruptcy cases in Toledo climb by record amount

4/3/2001

Blue-collar workers, managers, and other northwest Ohio residents drowning in debt swamped U.S. Bankruptcy Court with more cases in March than any month in Toledo history.

“It was off the charts,” court Clerk David Fickel said.

The 876 bankruptcy petitions filed last month represented a 51 percent increase from the same month a year ago. So far this year, filings are up a whopping 41 per cent over the same period in 2000, which notched the second highest number of bankruptcy filings in Toledo history.

Typically, monthly filings for the 21 northwest Ohio counties covered by the federal court in Toledo are between 300 and 500. No month has had more than 600 filings in at least the past six years until last month zoomed past that threshold.

Filings have climbed for eight consecutive months from the year-before level.

And while a few of the cases involve businesses, most petitions were filed by individuals struggling with mortgages, medical bills, car payments, and high credit card balances. Most are seeking to wipe out their debts.

Two factors have fueled the increase, lawyers said. A deteriorating economy, which has hit especially hard in the auto industry that dominates the area, has cut jobs and overtime. That gives people smaller income with which to pay bills.

Also, many petitions are being filed in anticipation of bankruptcy reform, which is expected to win congressional approval and will make it harder for people to walk away from their bills.

Toledo bankruptcy lawyer Elliot Feit has been deluged with calls.

“We're way backed up,” he said, explaining that his typist is behind on completing petitions and that prospective clients who call must wait two weeks for an appointment.

Concerns about the effect of proposed bankruptcy reform is the biggest factor in the glut of cases, he said. A major change would be that many individuals who are now able to wipe out debt under Chapter 7 would have to pay a portion of their bills.

Not everyone believes that the proposed changes are behind the increase, however.

Lawyers have told Mr. Fickel, the bankruptcy clerk, that many of their clients have been hurt by the cooling economy.

“Lots of attorneys have told me that they are counseling debtors who have had some sudden shift in employment,” he said. “They've been laid off, their hours have been reduced, or their benefits have been cut.”

Many people are getting into financial trouble as a result of rising medical co-pays, he added.

The first quarter of the year is typically a busy time of year for credit counselors, said Gale Crenshaw, executive director of Toledo's Community Credit Counseling agency. Many people are trying to recover from a holiday spending hangover and are thinking about bankruptcy because soon-to-arrive income tax refund checks will give them money to pay for a lawyer and filing fees, according to experts.

But things are worse this year because of economic conditions.

“People are reaching the end of their rope,” the credit counselor said. “They have bought into this good economy too much. Even people in good shape financially are getting into trouble because they're spending too much. Credit is too easy to get.”

William Swope, a Findlay bankruptcy attorney, believes several factors are responsible for the glut of cases. Increased publicity about the proposed reforms is prompting people to seek legal advice. And many employers, while keeping workers, are cutting back on hours. People accustomed to working full-time are now part-time, he explained.

National statistics on bankruptcy filings in the first quarter of 2001 won't be available for six to eight weeks, said Pamela Shepherd, a spokeswoman for the American Bankruptcy Institute.

Bankruptcy filings nationally fell slightly in 2000, but began to increase near the end of the year, she said. Nearly 1.3 million bankruptcies were filed last year, according to the institute.

Ohio ranks 17th in bankruptcies with 1 in 81 households filing, Ms. Shepherd said.

In northwest Ohio, through the first three months of the year, Chapter 7 petitions were up 43 percent to 1,710. There were two Chapter 11 business cases, up from 1 at the same time in 2000. There was a 26 percent increase - to 142 - in Chapter 13 cases, in which debtors agree to re-pay a portion of their bills.

Mr. Fickel said it is too soon to predict if 2001 will surpass 1998, which set a record with 5,713 bankruptcy filings. There were 5,531 filings last year.

He conceded that bankruptcy personnel have struggled to keep up with the glut of cases. “But they're very experienced and are doing a wonderful job with the sudden and unanticipated increase,” Mr. Fickel added.