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WNY sees significant drop in bankrupty filings

Buffalo, NY — While states in the South continued to experience increases in bankruptcy filings of up to 35 percent during the first two months of 2010, the Western District of New York reported a decrease of 10 percent. Nationwide, filings increased 14 percent as of the end of February 2010 over the end of February 2009, according to the American Bankruptcy Institute. During the same period, Buffalo area filings were down 7 percent, while the Rochester area was down by 15 percent, according to the U.S. Bankruptcy Court, Western District of New York.

“It has turned out to be a good thing we missed the bubble economy that was seen in other parts of the country over the past few years, because now we are not seeing the effects of the bust,” said Jeffrey Freedman, senior attorney, Jeffrey Freedman Attorneys as Law. “We can be thankful we’re not having the high rates of filings experienced in other areas.”

According to the National Bankruptcy Research Center, 2010 filings to date nationwide amount to about 1900 filings per million households – roughly one in every 530 households. The states with the highest household-adjusted bankruptcy filing rates are Nevada (well more than twice the national average), followed by Georgia, Tennessee, and California. The lowest filing rates were in Alaska, South Dakota, North Dakota, and the District of Columbia, all with about one-third the national average.

Paul Atkinson, president/CEO of Consumer Credit Counseling Services in West Seneca, said Western New York never mirrors national trends.

“We are always steady: no home runs, no strikeouts, just lots of singles. People here are actually getting back to work and those that were close to filing are coming to see us and putting in place a strict `hold-on’ plan to get their ships righted.”

The ability to hold on in the face of financial challenges has been assisted by last year’s changes in New York State law that prevent collectors from attaching bank accounts of less than $2,500.

“Most people who come to us don’t have more than $2,500 in the bank,” Freedman said. “People who are in financially difficulties tend to ignore the problem until something really threatening hits them. One threat was having their wages garnished or their bank accounts seized. Now, when peoples’ pay or benefit checks are deposited into their bank accounts, that money is safe.

“The change in the law has actually helped consumers avoid filing bankruptcy.”

While this is good for consumers, the fact there is little creditors can do to collect judgments is having an adverse effect on lending practices, said William Ilecki, an attorney with the law firm Bulan, Chiari, Horwitz & Ilecki, LLP. Ultimately, if lenders know they have little legal recourse for collecting debts, they hold back on lending, he said, which in turn stalls the economy.

“When you start looking at bankruptcy statistics, what you see is a reflection of what’s going on in the overall economy,” Freedman said. “First you see how complicated it is, then you see that it’s like a mobile — when you touch one piece all the other pieces move. It’s not an easy matter to steady that mobile and it’s not an easy matter to get the economy back on track.”