According to new reports from two U.S. Bankruptcy Court districts, Ohio saw 50,641 bankruptcy filings in 2012, representing a 14 percent drop from 2011's total of 58,846 bankruptcies. This marks the least number of annual bankruptcies in the state since 2006. However, many experts believe a flood of new filings will likely hit Ohio in the coming months.
Although the court data does not specify how many of 2012's filings were for personal bankruptcies, it does distinguish between Chapter 7 and Chapter 13 bankruptcy. In total, the state had over 38,000 Chapter 7 filings and just under 12,000 Chapter 13 filings. The Columbus area saw the most foreclosures with 11,331 filings, while Toledo accounted for the largest year-over-year drop in foreclosures, with 17 percent fewer bankruptcy filings compared to 2011.
Professionals have connected the downward trend to a number of factors. For instance, an increase in "uncollectible" individuals who are immune to creditors because of dire financial situations may have eliminated the immediate need for many Ohio residents to file for insolvency. According to one law professor and National Bankruptcy Conference member, those with no assets to protect typically do not feel the need to file for bankruptcy.
Likewise, creditors may be waiting to collect from debt-plagued citizens until they can claim more assets. An increasing number of banks are also reportedly delaying foreclosures against delinquent borrowers, which may be contributing to the reduced number of bankruptcies as well.
However, parents of college graduates are increasingly filing for bankruptcy because they are liable for their children's student loan debt. Such parents typically guaranteed their children's loans, but were saddled with repaying huge sums when their children failed to find employment.
Attorneys and other professionals say that filings are likely to increase in 2013. Partially responsible for this projected uptick is the expiration of a rule prohibiting the record-breaking 135,888 Ohio residents who filed for bankruptcy in 2005 from filing again for eight years. A sizable portion of these individuals are expected to submit filings again this year.
Source: Ohio.com, "Ohio bankruptcies fall, but surge anticipated this year," Rick Armon, Jan. 22, 2013