By Keith Gushard
As the economy stays mired in recession, the number of Crawford County residents filing for bankruptcy protection is on pace to hit its highest level in three years.
Attorneys involved in bankruptcy proceedings say it’s a reflection of the economic times.
“People are either laid off — or the disturbing trend I’ve seen — had a reduction in hours,” says J. Wes Rowden, a Meadville attorney who handles bankruptcy cases. “They’re working only four days a week or they’re given a week off a month.”
The subsequent economic effect on the person may snowball and eventually turn into an avalanche, Rowden says, as any savings are used up trying to cope with a 20 percent or more loss in income.
“Typically, it’s someone who has been paying regular expenses with credit cards hoping to get caught up in the future,” says Rowden. “But, then they have an event that breaks the camel’s back — an injury, sickness, a reduction in hours or a separation or divorce.”
Many couples sign mortgages based on a two-family income. When the family separates, the payments may be higher than one can afford, he says.
The typical bankruptcy client is anyone, says Rowden, who has had clients range in age from 18 to 80.
“They make too much money to get government help, but they’re not able to pay their bills,” Rowden says.
In Crawford County, there have been 95 bankruptcy filings through May of this year, according to Traci Speer, secretary with attorney Richard Roeder of Titusville, the area’s court-appointed bankruptcy trustee. May is the latest month figures are available.
It’s an average of 19 per month, that if it holds, would project out to 228 for the year — the highest level since the 225 cases filed in 2006.
Attorney Roeder presides over various hearings involving a person declaring bankruptcy and their creditors before the final bankruptcy hearing is held before a judge. He is the trustee for all bankruptcy cases in Crawford and Venango counties.
A downturn in the economy usually signals an upturn in the number of bankrupcy filings, he says. People file for bankruptcy to protect the assets they have such as their home, according to Roeder.
In a bankruptcy case, a creditor can’t take a person’s home as long as the mortgage payments are being kept up to date, he says.
“Almost everything a person owns is an asset of a bankruptcy case,” Roeder says. “Most everyone’s single largest asset is their home. There’s no reason to file unless you can save something.”
But as the housing prices have fallen with the economy, Roeder says it seems not as many people are filing as he had expected.
“With falling real estate prices and a second and third mortgage on a home some people are walking away from them,” he says. “Now they’re not filing because it’s not worthwhile for them financially to protect the home because they owe more than it’s worth.”
A mortgage foreclosure puts the home up for a sheriff’s sale — held when a mortgage company or entity forecloses on the property for unpaid mortgage payments.
Though the number of persons in Crawford County filing bankruptcy is on pace for 228 this year, “it’s unpredictable how many bankruptcies there will be,” said Speer, Roeder’s assistant.
While 228 is high, the biggest number of bankruptcies in recent years was in 2005, when 538 countians filed.
That year the figure was so high because of newly passed federal legislation that would make it more difficult to declare bankruptcy. With that change coming, many people took advantage of the “easier bankruptcy” process before it was gone.
The new law implemented an income means test for the first time.
It determines if a person is worthy of bankruptcy relief and applies only to those individuals whose debt is primarily consumer — credit card — debt.
Keith Gushard can be reached at 724-6370 or by e-mail at kgushard@meadvilletribune.com.
