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Joblessness Fuels Bankruptcy Spike

The number of bankruptcies filed in Buffalo increased by 7.4 percent last year, and rising unemployment appears to be one of the big factors, experts say.

But on a national scale, the increase in bankruptcy filings was much more severe — about 32 percent.

More than 6,000 bankruptcies were filed in Buffalo last year by individuals and businesses from eight counties — Erie, Niagara, Allegany, Cattaraugus, Chautauqua, Genesee, Orleans and Wyoming.

It’s difficult to pinpoint any one reason why bankruptcies in Western New York have risen in each of the past three years, said U.S. Bankruptcy Court Judge Carl L. Bucki, the region’s chief bankruptcy court judge.

But, without a doubt, the region’s growing unemployment problem is one of the reasons, Bucki said.

“Job losses, divorce, health care issues, drugs, gambling, misuse of credit cards — every problem that can exist in a household — we see it at Bankruptcy Court,” the judge said in an interview this week.

Bankruptcy is a federal legal process that allows people or businesses with large debts to either eliminate their debts or make a court-sanctioned plan to repay a portion of their debts.

The vast majority of bankruptcies filed in Buffalo last year — more than 97 percent — were filed by individuals, as opposed to businesses.

The fact that local bankruptcies are up came as no surprise to John Slenker, the state Labor Department’s regional economist in Buffalo.

“Over the last three years, the automobile industry and related industries have been hit really hard, and there have been ripple effects,” Slenker said Tuesday. “People tend to live with their debt level set for a certain income. When that income is no longer there, it’s a real hardship.”

A report issued by his office last month showed the region’s employment picture was in its worst shape in 15 years. The report said Erie and Niagara counties lost 13,800 jobs in a year.

Slenker said the two counties had a total of 46,500 unemployed people who were actively looking for jobs in November, the highest number recorded for any November since 1990.

“At the same time, I tell people not to give up,” the economist said. “If you lose your job, blame the economy, but don’t take it personally. If you keep looking, eventually you will find something.”

“Unemployment and underemployment are major problems,” said Jeffrey M. Freedman, a Buffalo attorney whose offices file more than 10 percent of the region’s bankruptcy cases. “I can’t give you an estimate in numbers, but it’s a very frequent occurrence that when couples come to us to file a bankruptcy, one or both of the spouses has lost a job.”

Nationwide, the increase in 2009 bankruptcies is far more severe than it was locally.

According to the American Bankruptcy Institute, more than 1.4 million Americans filed consumer bankruptcies last year, an increase of 32 percent from 2008. National statistics on business bankruptcies are not yet available, but experts said those numbers are also up sharply.

“The spike in bankruptcy filings for both consumers and businesses reflects the continuing effects of today’s weak economy,” said Samuel J. Gerdano, executive director of the institute, which studies bankruptcy trends. “With unemployment surpassing 10 percent and credit to businesses remaining tight, consumers and businesses are increasingly turning to the financial relief of bankruptcy.”

Why is the national spike in bankruptcies so much sharper than it is locally?

“I think it’s because the Buffalo economy never experienced some of the go-go times that they had in many other parts of the country,” Freedman suggested. “We didn’t have as far to fall as places like Phoenix.”

Bucki said he has noticed one other trend in recent years that he finds disturbing — a growing number of senior citizens who have to file bankruptcies because of gambling debts.

“I do see more older people filing [bankruptcies], and I think a lot of them are getting caught up in gambling,”

Bucki said. “It’s as though some people retire and realize they have all this time on their hands, and off they go to the casinos.”