Bankruptcy filings tumbled more than 25 percent in Buffalo last month in the biggest year-over-year drop since last July.
New cases filed in the U.S. Bankruptcy Court for the Western District of New York fell 20.2 percent in April, as 591 new petitions were filed, down from 741 a year ago.
That includes a 25.1 percent drop in Buffalo, to 370 from 494 a year ago, but just a 10.5 percent drop in Rochester, to 221 from 247.
So far this year, new filings are down 12 percent districtwide, to 2,206 from 2,508 for the first four months of 2011. That includes 1,413 cases in the Buffalo court, down 12.8 percent, and 793 cases in the Rochester court, down 10.7 percent.
Peter Grubea, the leading bankruptcy attorney in Western New York by number of filings, said he had expected a gradual decline and leveling-off in bankruptcies, but "I am frankly surprised that the decline is so large so far this year."
One factor, he speculated, could be the "unusually warm weather." That would fit a historical pattern when the year's first warm weather arrives, he said.
But more significant are the ongoing trends. Many potential bankruptcy clients are already living on fixed income, and federal and state laws now provide enough protection for their minimal assets and income. As a result, Grubea said, even though they have enough debt to file for bankruptcy, "there is no urgency because they are judgment-proof and they have a tough time coming up with the fees."
Also, he said, the national foreclosure settlement has slowed down the foreclosure process "by a few months" while the final details are negotiated and the five major servicing banks "sort through the problem mortgages to see which ones meet the criteria for help under the settlement."
Once that's complete, however, Chapter 13 bankruptcy cases will likely pick up.
Finally, Grubea said, some bankruptcy lawyers have decided that television and radio advertising is no longer cost-effective, so "people just aren't as tuned in to the availability of bankruptcy relief."
By type of case, Chapter 7 filings totaled 443 for April, including 281 from Buffalo and 162 from Rochester. All but 18 were personal or individual filings. So far this year, there have been 1,616 Chapter 7 petitions for court protection, including 1,055 in Buffalo and 561 in Rochester.
There were also 146 filings under Chapter 13, including 88 in Buffalo and 58 in Rochester. All but three were individual filings. For the year to date, there have been 577 Chapter 13 cases, including 350 in Buffalo and 227 in Rochester.
Only two cases were filed under Chapter 11 in April, one in each city. So far, there have been 12 cases this year, including seven in Buffalo and five in Rochester.
Chapter 7 allows consumer or business debtors to liquidate their assets to pay off debts and then erase any remaining amounts owed so they can start over. Chapters 11 and 13 call for business and individual debtors, respectively, to agree to repayment plans over time.
Geographically, the Buffalo-area filings in April included 208 in Erie County and 72 in Niagara County, followed by 35 in Chautauqua County, 16 in Cattaraugus County, 14 in Genesee County and 12 in Orleans County. Allegany and Wyoming counties had nine and four, respectively.
"Consumers are reducing their debt loads and are wary of taking on more credit," said Jeffrey Freedman, the region's No. 2 bankruptcy lawyer by number of filings. "There are other trends, however, that could affect filings in the future."
Specifically, he cited the rapid growth of student debt, which rose by more than $1 billion last year. But the vast majority of student debt is not dischargeable in bankruptcy court. Also, low wages and lack of consumer confidence means people "aren't spending on consumer goods," he said. "It all adds up to a plodding economic recovery."