Bankruptcy filings in Western New York continued to defy national trends in January, falling by 20 percent from a year earlier, on the heels of a full year in which filings fell by 10 percent from 2009, according to new court statistics.
Observers credit the lower numbers to the regional economy and housing market, noting that the Buffalo Niagara region didn’t achieve the heights or suffer the busts of the country’s high-flying cities.
“It says the economy in Buffalo is not following the pattern that’s indicated in the rest of the country,” said Carl L. Bucki, chief judge of the U. S. Bankruptcy Court for the Western District of New York. “We’re just operating under a different trend, particularly on a consumer level.”
As a result, while Western New York lost jobs because of the recession, consumers and businesses here haven’t struggled as much, and the unemployment rate remains well below the national average.
“Consumers did tighten their belts, cut their spending on credit and started saving more to protect themselves against possible job losses and to recoup some of the wealth lost when homes lost value,” said bankruptcy attorney Jeffrey Freedman.
“So in spite of the fact unemployment is still high, the fact consumers are being more responsible with their money is keeping them out of the bankruptcy courts,” he added.
That’s borne out by the bankruptcy filings. In what has become a consistent pattern, new bankruptcy cases filed in Buffalo and Rochester in January fell 19.6 percent, to 434 from 540 in January 2010, according to the bankruptcy court.
That included 281 cases in Buffalo, down 19.7 percent, and 153 in Rochester, down 19.5 percent. It’s the lowest tally for the month of January since 2006, and the lowest of any month since February 2006.
Nationally, 88,773 cases were filed in January, down by a slower pace of 9 percent, to the lowest level since 2009.
For January 2011, the Western New York total included 263 cases filed under Chapter 7 of the bankruptcy code —165 in Buffalo and 98 in Rochester— and 169 under Chapter 13—114 in Buffalo and 55 in Rochester. Only two Chapter 13 and 13 Chapter 7 cases involved businesses. There were also two filings under Chapter 11, both in Buffalo.
Chapter 7 allows an individual or business debtor to erase debts and start over after liquidating assets. Chapters 11 and 13 call for a reorganization and eventual repayment of debts by businesses and consumers, respectively.
Among Western New York counties, Erie County had the most filings
in January, with 162, followed by Chautauqua County with 35. Niagara County was third, with 33, followed by 14 in Genesee, 13 in Cattaraugus, 11 in Allegany, eight in Orleans and five in Wyoming.
That represented a drop of 27 percent in Erie and 30 percent in Niagara, but just 2.8 percent in Chautauqua.
However, part of the big January decline districtwide may be artificial. On Jan. 22, a new state law took effect that broadened the bankruptcy exemptions for consumers, allowing more room for debtors to protect assets.
Of the 281 new filings in January, 159 or 57 percent came in the six business days after Jan. 23. By comparison, the same week a year ago had just 75 cases. And so far in February, through Friday, 125 new consumer cases were filed, more than double the 54 from the same 11-day period a year ago.
Bucki said that appears to indicate that some local attorneys and their clients held off on their filings until after the law became effective.
“It looks like our numbers in February are going up rather dramatically. It’ll be interesting to see what happens,” he said. “It’s possible that some filings may have been delayed.”
Still, Bucki calls that a “bubble” and said he expects the general declining trend to continue. Indeed, January’s results followed an entire year of improvement in Western New York, as measured by declining new cases.
New filings fell 21.1 percent in December, to 537 cases, and 9.9 percent for all of 2010, to 8,763, the lowest for a full year since 2007. That flew in the face of the sluggish economic recovery nationally, resulting in U. S. bankruptcy filings rising 9 percent to 1.53 million, hitting the highest level since 2005 bankruptcy reforms tightened the rules to prevent perceived abuses of the system.
“These numbers show that the economy trumps the lawmakers,” Freedman said. “Bankruptcies increase when people lose their jobs and can’t pay their bills.”
In December, there were 336 Buffalo cases, down 23.8 percent, and 201 in Rochester, down 16.3 percent. For the full year, there were 5,640 filings in Buffalo, down 9.6 percent from 2009, and 3,123 in Rochester, down 10.5 percent.
The full year included 6,353 Chapter 7 cases — 4,100 in Buffalo and 2,253 in Rochester — and 2,371 Chapter 13 filings — 1,506 in Buffalo and 865 in Rochester. There were also 36 Chapter 11 cases.
Geographically, Erie had the most filings last year, with 3,479, down 5.7 percent from 2009. Coming in a distant second was Niagara, with 888, down 10.6 percent, followed by Chautauqua, down 23.3 percent to 518. Cattaraugus was fourth, with 236 cases, followed by Genesee with 166, Orleans with 146, Allegany with 107 and Wyoming with 98.
“The reason bankruptcies are low in Western New York is that we have dodged the bullet of the deep recession that has hit the rest of the country,” Freedman said. “And the end-of-year numbers bear that out.”
jepstein@buffnews.com