For the first time, new bankruptcy cases in northwest Ohio exceeded 900 in a month, assuring that this year will smash what had been last year's runaway record.
In stunning fashion, filings for the 21 northwest Ohio counties covered by the U.S. Bankruptcy Court in Toledo jumped to 923 in October, up from 786 the month before and 32 percent higher than the same month a year ago. Making the monthly figure more remarkable is that until last year, no month had had more than 600 cases.
While the specific reason for October's climb is uncertain, experts attribute the slumping economy for the rise in bankruptcies, as job cuts and less overtime has created an unmanageable financial pinch for some trying to pay bills. At the root, perhaps, is that spending was incurred without thought to income being trimmed, experts say.
Unlike four or five years ago, an increasing amount of credit-card debt is related to getting cash advances to pay bills as people wait for employment conditions to improve, said David Fickel, clerk of the bankruptcy court in Toledo.
“It seems to be the credit card use is not so much to buy materials things but just to get cash advances,” he said.
Cash advances on credit cards have been used by some to pay mortgages or other bills, leaving the users stuck with the debt and with finance charges, said John Walters, director of Toledo's Community Credit Counseling Specialists.
“You're moving the debt over,” he said.
The local filings for the year total 7,512, up 11 percent from a year ago, and are on pace to easily break last year's 7,989 level this month. Last year's total vaulted past the prior record of 5,713 in 1998. Just six years ago, the annual new cases were less than half what this year is likely to be.
One Liberty Center, Ohio, couple filing last month appear to fit the local profile of people with big credit card debts.
In their filing, the couple report $8,230 in assets and $42,348 in liabilities, with $24,275 owed on credit cards, all incurred this year and last as their income plunged from $33,500 last year to $21,600 this year. The couple filed for Chapter 7 liquidation, which means most of their debts could be forgiven.
A couple in Rossford have similar problems. The pair filed for Chapter 7 last month with $115,780 in assets and $138,061 in debts. Their annual income from his job at General Motors Corp.'s Toledo Powertrain factory dropped nearly $10,000 as overtime dwindled between 2000 and 2001.
Monthly expenses top $4,000, but income is less than $3,000; so they have borrowed $720 from a 401(k), have $30,600 on general credit cards, have a second mortgage on their $100,000 house, owe nearly $1,360 for overdrawing a bank account, and have $4,100 on store charges or credit, the filing shows.
The local court does not keep a separate tab for business bankruptcies, but the bulk of the 6,894 Chapter 7 cases are individuals. All of the 604 Chapter 13 wage-earner repayment plans are individuals, and all of the 14 Chapter 11 reorganization filings are businesses. No Chapter 12 farm bankruptcies have been filed locally this year.
Bankruptcies are up nationally, too, but not by as much as in northwest Ohio. Last year's record of 1.5 million filings should increase by 5 percent, or less than the half the current increase in the Toledo area, said Sam Gerdano, executive director of the American Bankruptcy Institute in Alexandria, Va.
With reform legislation pending that would make it tougher to erase debts, filings nationwide could increase further if the measure passes, he said. “If that happens, it will likely prompt people on the bubble of thinking about bankruptcy as a possible option,” he added.