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While the country's bankruptcy filings surge, Western District of NY sees an 18% decrease in July

Posted: August 04, 2010

Buffalo, NY -- Consumer bankruptcy filings this year in the U.S. were up 9% in July 2010 compared to July 2009. The total number of filings for the entire year are expected to exceed 1.6 million. “These are levels not seen since the Bankruptcy Code was amended in 2005,” said Jeffrey Freedman, Senior Partner, Jeffrey Freedman Attorneys at Law. “This is largely attributable to years of rising consumer debt and low savings rates in conjunction with the housing and unemployment crises facing our nation.”

Filings in the United States Bankruptcy Court Western District of New York however, are falling in significant numbers. In the Western District (which includes the 17 counties surrounding Buffalo and Rochester) for the period beginning July 1, 2010 and ending July 31, 2010, filings were down 18 percent compared to the same period in 2009, and 6 percent for the year to date.

“We are fortunate we haven’t experienced the housing crisis, which is turning out to have long-lasting and deep effects on other areas of the country,” Freedman said. “California, for example, is experiencing record-high filings in spite of BAPCPA (the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005), which was supposed to reduce the number of filings.”

According to the American Bankruptcy Institute, filings for 2010 nationwide will surpass the 1.6 million mark, to the level they were before the new law took effect.

“Reform was designed to stop people from `gaming’ the system. Unfortunately, Congress was ill-informed about the numbers of debtors who were actually doing that,” said Freedman.

Some experts say the recession has resulted in a “shadow economy” where debtors don’t file bankruptcy because BAPCPA has made it too expensive for them to afford to do so. Instead, they simply go into foreclosure on their homes or default on student loans and bank card debts. According to S&P/Experian Consumer Credit, defaults on bank card loans increased from 7.7 percent in March 2010 to 9.1 percent in April 2010.

“This shadow economy may also be affecting Western New York and contributing to the significant decreases in filings that we are seeing here. We have had so many people out of work for such long periods of time that they have given up and they don’t believe they can afford to file bankruptcy,” Freedman said. “That’s not what the original intentions of our society were meant to be. We were intended to be a compassionate, forgiving society that gave people a fresh start when they really needed it.”

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