News

Bankruptcy Filings Continue to Fall

Posted: October 06, 2011

Buffalo, NY – Consumer bankruptcy filings continued to fall locally and nationally in September. The U.S. Bankruptcy Court, Western District of New York, reported filings in the greater Buffalo area decreased 6 percent during September 2011, compared to September 2010. For the nine month period January 1, 2011 through September 30, 2011, filings were down 18.6 percent compared to the same period last year.

Nationally, September 2011 filings declined 17 percent compared to September 2010 according to the American Bankruptcy Institute (ABI). For the nine month period January 1, 2011 through September 30, 2011 filings were down 10 percent nationally compared to the same period last year. Per the ABI, the trend of declining filings is consistent with consumers reigning in their spending, household debt and consumer credit.

Per Patrick Lunsford (senior editor of insideARM.com), although current charge-off rates at U.S. issuers are still above historical averages, the rates have plummeted in the past 12 months. Delinquency rates have dropped 28 percent from 5.05% in second quarter of 2010 to 3.62% in the second quarter of 2011. Charge-off rates went from 10.37% to 5.6% (a decline of 45 percent) over the same period. Going forward, Lunsford expects to see charge-off rates to be more in line with delinquency rates.

“The sluggish economy has eroded consumer confidence and individuals have focused on reducing their debt rather than increasing it” said Jeffrey Freedman, Jeffrey Freedman Attorneys at Law. “Credit cards are being used more responsibly, payments are being made more timely, and it’s become harder to get new credit cards.

Consumers are becoming more conscious of their debt and making efforts to save instead of spend. This is evident by the decline in delinquency and charge-off rates. The Federal Reserve is also reporting a decrease in revolving credit at a rate of 5.25 percent annually (as of July, 2011). If we have continuing high unemployment and under employment it may trigger another round of increased bankruptcy filings.”

In a recent survey of bankers done by insideARM.com many respondents expect delinquencies in the next six months to rise on auto loans, credit cards and student loans. Credit card balances are expected to increase driven by higher spending by some consumers and smaller monthly payments by others.

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