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Bankruptcy cases keep dwindling in region

The number of new bankruptcy cases fell by 13 percent in Buffalo last month and by nearly 20 percent in Rochester, as either consumer debt problems continue to wane or debtors give up on seeking court protection because they can't afford it.

Bankruptcy filings in the judicial district covering the two cities fell by 15.1 percent in March, to 656, from 773 a year ago, according to new statistics from the U.S. Bankruptcy Court for the Western District of New York. That court handles cases in Buffalo and Rochester, as well as satellite locations in smaller cities in an 18-county region.

That includes a 12.7 percent drop in Buffalo, to 419 filings, from 480 a year ago, and a 19.1 percent drop in Rochester, to 237, from 293.

It's the third straight drop so far this year -- and the largest. To date, for the first quarter of 2012, total filings in the district are down by 8.7 percent, to 1,615, from 1,768. That includes 1,043 cases in Buffalo, down by 7.3 percent, and 572 in Rochester, down by 11 percent.

Bankruptcy filings have fallen every month since May 2010, and there hasn't been any sustained increases for more than a month at a time since 2009. That matches the tightening of credit by lenders, making it much harder for all but the most creditworthy borrowers to get loans and credit cards. And consumers have been tightening up on their own spending at the same time, paying back loans and reining in their expenses so as not to get into more trouble.

But experts say there's another cause that shows how bad the economy is: Debtors simply can't afford the filing and legal fees for bankruptcy and, because of their own lack of income and new legal protections for a minimum amount of assets, they don't have to seek court protection.

The average cost for filing a Chapter 7 bankruptcy petition -- including attorney's fees and court costs -- is now $1,477 nationwide, according to Buffalo bankruptcy attorney Jeffrey Freedman. Chapter 7, the most frequently used form of bankruptcy, allows consumers and certain small businesses to erase most debts and start fresh.

"For households that are really struggling -- the ones that would benefit the most from having their debts discharged -- it's almost impossible to accumulate that amount," he said.

Overall, the cost of filing has risen by about 60 percent since 2005, when Congress passed the Bankruptcy Abuse Prevention and Consumer Protection Act to reform the bankruptcy code and make it harder for debtors to just erase unsecured debt, particularly from credit cards.

Geographically, within the Buffalo region, there were 261 filings in Erie County and 66 in Niagara County. That's followed by 42 in Chautauqua County, 17 in Genesee County, 13 in Cattaraugus County, 12 in Orleans County, six in Allegany County and two in Wyoming County. All were down from a year ago.