Local bankruptcy filings reflect debtors walking tightrope of financial stability

The United States Bankruptcy Court: Western District of New York (which includes Buffalo and Rochester) reported a 5.5 percent increase in bankruptcy filings for the period September 1, 2018 to September 30, 2018, compared to the same month in 2017.  In the Buffalo area there was a 12.9 percent increase, while the Rochester area saw an 11.1 percent decrease.

Although the economy looks healthy, with high employment rates and credit scores reaching their highest point since the Great Recession, the numbers of increasing bankruptcy filings in some areas show consumers are still struggling.  Average FICO scores may be at 704, a new record marking an eight-year run of increases; however, Americans are getting further in debt, according to a report by the National Association of Consumer Bankruptcy Attorneys (NACBA).

“It’s not all good news.  The numbers show that while Americans are paying their bills on time, they are also borrowing at a higher level,” said Christopher J. Grover, attorney, Jeffrey Freedman Attorneys, PLLC.  “Mortgage balances are once again growing at a rate comparable to what we saw during the pre-housing bubble.”

Americans continue to be poor savers. The ratio of personal savings to disposable personal income fell to 6.7 percent in June 2018, down from 7.4 percent in February.

“When you walk a tightrope stretched thinly between your debts and your earnings, you need to build in some sort of reserve. Earning power can suddenly decline due to a job loss or illness,” Grover said.  “Most Americans don’t seem to have learned the wisdom in that — even though so many U.S. households fell on extremely hard times during the most recent recession.”

There are challenges ahead for consumers.  The Federal Reserve Bank recently raised interest rates and may raise them again before the end of the year.  Loans for cars are being extended so buyers can take longer to repay them; however, economists predict auto loans may drive the next subprime lending crisis.