was successfully added to your cart.

After Declining In 2006, Bankruptcy Filings Soar Again In Western New York

Local bankruptcy filings increased sharply last year, following a nationwide pattern.

A much-debated law that took effect in October 2005 was designed to slow the bankruptcy rate throughout the country — and it did.

Filings dropped dramatically — locally and nationally — in 2006 but began moving up again last year. In Western New York, the number of cases filed by individuals and businesses rose by 25.4 percent.

Experts describe that increase as an indicator of troubles in the economy and as a sign that a growing number of Western New Yorkers realize bankruptcy remains an option for those with money problems.

“The new law scared a lot of people off. We still have people who call us and say, ‘Is there still a bankruptcy system?’ ” said Paul R. Warren, Bankruptcy Court clerk for the Western District of New York.

“But the numbers are now increasing.

I think more people are realizing that bankruptcy is still there as an option for people who need help.”

Massive job cuts at such companies as Eastman Kodak in 2008Rochester and the Delphi Thermal Systems plant in Lockport have put many people in Bankruptcy Court, Warren said.

But Carl L. Bucki, the region’s chief bankruptcy judge, cites four other factors.

Credit card debt remains a “huge problem,” he said, adding that couples facing $50,000 or more in credit card debts are not unusual.

“And the three most significant aggravating factors that I see the most are domestic problems, substance abuse and gambling,” Bucki said.

Bankruptcy Court in Buffalo handles cases for debtors in eight counties — Erie, Niagara, Chautauqua, Wyoming, Orleans, Allegany, Cattaraugus and Genesee.

For four straight years — 2002 through 2005 — it set a dubious record for filings. In 2005, the number of cases skyrocketed to 14,009, as those with debt problems rushed to file before the law changed.

The region’s total dropped sharply to 4,129 in 2006 but rose again, to 5,176, last year.

“For several years before the law change took effect, we had a lot of people filing cases. People knew that the law was about to become more strict,” said Jeffrey M. Freedman, one of the region’s busiest bankruptcy attorneys.

“The law did become stricter, and it is more expensive and difficult for people to file for bankruptcy. We’ve had people come to our office, and we’ve presented them with a list of 42 items of information we need for their case. And some have just turned around and walked out.”

Congress changed the bankruptcy law because of claims the system had made walking away from debts too easy for those who carelessly run up huge credit card bills. Court filing and legal fees increased, and debtors were required to provide much more financial information than previously had been required.

But Freedman and other critics say the changes have hurt honest debtors, such as those who became ill or got laid off from their jobs.

“I used to do a typical Chapter 7 [bankruptcy] case for under $1,000, including all the filing fees,” Freedman said. “Now, including all the fees, it’s more like $1,500. Lawyers are making more money, but a lot of people who are already deep in debt can’t afford that.”

Complete nationwide figures for last year are not yet available, but the American Bankruptcy Institute said bankruptcies filed by consumers rose by 40 percent.