We are in a very weak recovery after the worst recession since
the 1930's. Unemployment is hovering around 9%. You
would think that bankruptcy filings would be increasing.
Surprise!!! Bankruptcy filings are actually falling.
Comparing the period October 1, 2009 to September 30, 2009 to
October 1, 2010 to September 30, 2011, bankruptcy filings
across the United States have fallen 8%. Here in the
Eastern District of New York, which covers Staten Island, Brooklyn,
Queens, Nassau and Suffolk Counties, comparing
the periods of September 1, 2009 to August 31, 2010 with September
1, 2010 to August 31, 2011 Chapter 7 Bankruptcies have fallen by 4%
and Chapter 13 has fallen by 36%.
Doesn't seem logical, but when you stop to think about it, it
does makes sense. Bankruptcy filings are droping because here
in New York and the rest of the U.s. because the economy is in such
dire straits.
Many people just don't have the money or energy for
bankruptcy. They are more concerned with putting food on the
table a roof over their heads.
When the markets crashed in 2008 and 2009 banks issuing credit
cards cut credit lines and closed many accounts. They
have not extended large amounts of credit since them. Many
people that had credit card debt have already filed
bankruptcy. With credit now scarce fewer people are
needing to file bankruptcy due to credit cards.
Many homeowners in New York, as in the rest of nation, are
underwater and are behind in their mortgage payments.
Some of these unfortunate homeowners have been attempting to modify
their mortgages. The modification process takes many months
and most often doesn't lead to a modification of the
mortgage. These homeowners are holding off on filing
bankruptcy because they want to see the results of their
modification efforts.
Many homeowners are also late in their payments and are in the
foreclosure process. With the large number of loans in
foreclosure the banks and courts are backed up. This has
resulting in homeowners living in their homes, without paying
mortgages, for many months and even years. Many of these
homeowners are putting off filing a Chapter 7 Bankruptcy because
they are not ready to walk away from their homes and move
on.
In better economic times many people who fall behind in mortgage
payments would look to Chapter 13 for relief. With this poor
economy many of these people can't afford a Chapter 13 repayment
plan in order to catch up on their mortgage payments.
This has resulted in a truly stunning drop of 36% in the
Eastern District of New York.
When bankruptcy numbers start to rise that will probably reflect
an improving economy. Eventually people will have the money
to file bankruptcy so that they can get their finances in order and
start the process to rebuild their credit.