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Ohio bankruptcies decline in 2012, analysts say it may be just a lull

In the last post, this blog discussed the increase in foreclosure activity in Ohio last year. Overall, foreclosures rose slightly, but that rise followed a lull in home repossessions. Commentators say that the lull in foreclosures early in the year last year was a factor in a reduction in the number of people filing for bankruptcy in Ohio in 2012, when compared with 2011.

Overall bankruptcy filings in Ohio dropped 14 percent in 2012 as compared with 2011. The number of Ohio residents seeking bankruptcy protection fell to its lowest level since 2006. As foreclosure activity may have been one factor, analysts say that several issues combined to reduce Ohio bankruptcies in 2012. Commentators also expect the number of bankruptcies to rise again this year.

While many people who are facing foreclosure look to the bankruptcy code as one possible solution, not all bankruptcies involve foreclosure. Most bankruptcy lawyers know that each household has its own financial structure. Medical bills, credit card debt and other issues can often factor in a person's decision to file for bankruptcy.

In analyzing last year's decline in Ohio bankruptcy filings, some commentators say that the tough economy was one factor in the decline. Some people who may be overwhelmed with debt declined to file bankruptcy because they did not have enough assets for creditors to grab-whether through wage garnishment, repossessions or other legal forms of debt collection. A law professor at the University of Dayton recently told the Akron Beacon Journal that some people who have nothing to protect from creditors choose not to file.

However, as the economy continues to improve, commentators believe that many people suffering from large debt balances may turn to bankruptcy as their financial situation begins to improve.

But data from the two U.S. Bankruptcy Court districts in Ohio shows that more than 50,000 personal and business bankruptcies were filed statewide last year. Overall filings reached 50, 641 as compared to 58,846 in 2011. Obviously, even with the decline, a significant number of people filed for debt relief under the Bankruptcy Code last year. The majority were filed under chapter 7, with 38,606 chapter 7 filings last year. Nearly 12,000 cases-11,929-were filed under chapter 13, which allows a person (or husband and wife) to reorganize their personal household debts.

Commentators say that many Ohio residents are filing for bankruptcy due to the student loan issue. The new trend, analysts say, is that many parents who cosigned student loans for their children are filing for bankruptcy after their kids could not find a job to pay the student loans, strapping the parent's finances.

While student loans are theoretically possible to discharge in bankruptcy, the standard is difficult to meet. However, many saddled with student loan debt find relief in bankruptcy from other debts, making the student loan payments easier to manage.

Source: Akron Beacon Journal, "Ohio bankruptcies fall, but surge anticipated this year," Rick Armon, Jan. 22, 2013

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