>>>RELATED: Many fall below minimum wage average
“It’s definitely the economy,” said Andrew Zeigler, a certified specialist in consumer bankruptcy law at Kennel, Zeigler LLC in Riverside. “People are getting back to work, and we’ve seen a slow, steady decline in the number of bankruptcy filings.”
Last year’s total was the lowest in the state since before the Great Recession began in December 2007, and was down a whopping 73 percent from Ohio’s post-recession peak of 69,315 filings in 2010.
The vast majority, more than 80 percent, of total bankruptcies in the state were personal bankruptcies falling under either Chapter 7 or Chapter 13 of the federal bankruptcy code.
Such bankruptcies have been declining since the economic recovery began, coinciding with a dramatic fall in unemployment in the state, which also peaked in 2010 at 11 percent, according to the U.S. Bureau of Labor Statistics.
Since then, Ohio unemployment has fallen as low as 4.6 percent in August last year. The rate was 5 percent in June — the most recent month for which figures are available.
In addition to fuller employment, an overall decline in the number of divorces and home foreclosures — which also frequently lead to bankruptcy — has fewer southern Ohio families to seek bankruptcy to get a fresh start financially, Zeigler said.
“A lot of people facing foreclosure had to file for Chapter 13 because the banks weren’t willing to negotiate,” he said. “Now the government is forcing banks to comply with reform legislation allowing people to apply for loan modifications and avoid the need for Chapter 13.”
Nationwide, total bankruptcy filings fell to 398,495 during the first six months of 2016, representing a 6 percent decrease from the 422,914 total filings during the same period a year ago, according to ABI.
But while individuals have reaped the benefits of a healthier economy, many employers haven’t been as fortunate.
Last month, Thomson Reuters predicted U.S. companies in S&P 500 index would record a fourth-straight period of declining earnings in the second quarter this year, while revenues are expected to slip for the sixth-straight quarter.
Collapsing oil prices are keeping profits down in the oil industry, known for a history of booms and busts, while ultra-low interest rates are hurting banks and crimping business investment, making it difficult for struggling companies to stay afloat.
As a result, total commercial bankruptcy filings during the first six months of the year increased 29 percent to 19,470 over the 15,071 during the same period in 2015, according to ABI.
“As economic challenges continue to weigh on the balance sheets of struggling companies, especially those in energy and retail, more businesses are seeking the financial fresh start of bankruptcy,” ABI Executive Director Samuel Gerdano stated. “Commercial bankruptcy filings for 2016 will likely total close to 40,000.”