Buffalo, NY — During the month of April, consumer bankruptcy filings for the U.S. Bankruptcy Court Western District of New York continued to decline. The District as a whole saw a decrease of 13.2 percent. The greater Buffalo area was down 6 percent, with greater Rochester down 25 percent. These numbers are in sync with the national trends, which saw consumer bankruptcies decline 13 percent during the first quarter of 2014 compared to the first quarter of 2013.
Last year, combined consumer and business bankruptcy filings fell by 24 percent. At the beginning of 2014, bankruptcy expert Teresa Kohl of SSG Capital Advisors, an investment bank, said bankruptcy has become, “an expensive proposition and it’s something people avoid at all costs.” As of June 1, 2014, filing will become even more costly due to fee increases imposed by the Judicial Conference of the United States.
“Consumers who are in financial distress can’t afford the fees that are in place now,” said Jeffrey Freedman, managing attorney, Jeffrey Freedman Attorneys, PLLC. “Those in the middle class and with incomes below the middle are experiencing stagnant or decreased earnings — they will avoid bankruptcy in even greater numbers after June 1st.”
For consumers, filing fees for a Chapter 7 increased by 9.5 percent, and Chapter 13 increased 10.3 percent. The total increases imposed by the Judicial Conference are predicted to raise the Court’s income by about $35 million per year based on current caseloads, according to the American Bankruptcy Institute.
Student loan debt, which cannot be discharged in bankruptcy, continues to rise to the top of many consumers’ debt problems, straining budgets. Congress is proposing to cap monthly payments to a share of annual income and forgive balances if the borrower makes regular payments for 25 years. Those working in the public sector or for nonprofit organizations would be eligible to have their debt forgiven after 10 years. Critics say this will cost the country $14 billion each year.
“There are two obvious directions that would help consumers at this point in time,” Freedman said. “We should make it easier and less expensive for people to seek the protection of bankruptcy, and we should allow select student loans or a portion of student loans to be discharged in bankruptcy. These are debts people took on trying to improve their earning potential, not through extravagant spending.”
The United States has had a history of being compassionate to those who fall on hard times and find themselves in serious debt, this is not the time to abandon that compassion, Freedman said.