Number of Bankrupcties rising
By George Germann
Daily News Staff Writer
A local bankruptcy expert - Attorney Charles Bierbach - said he is not shocked with a report released this week that bankruptcy filing rose one-fourth in Pennsylvania last year. Being blamed were rising monthly mortgage payments that have been overwhelmed already by shaky household finances and tight credit markets hurting struggling businesses.
Bierbach is a Chapter 7 Panel Trustee for the U.S. Bankruptcy Court for the Middle District of Pennsylvania.
He said he forecast current events back in 2005 when Congress changed laws making it harder to file for bankruptcy, and it is getting worse for the average consumer.
“I predicted this would happen,” said Bierbach. “Back then (prior to the new law), people were filing Chapter 7, shedding credit card and medical debt, but making efforts to save their homes. Now I am seeing people coming in front of me and seeing more surrendering of residential real estate.”
He said before 2005, people were being encouraged by lenders to take out second and third mortgages, and now that is coming back to haunt borrowers.
In Pennsylvania, where the foreclosure rate is relatively modest, the bankruptcy rate of 2.4 filings per 1,000 residents last year was below the national average and 26th overall.
Of Pennsylvania’s three federal districts, the 25-county western district registered the most filings, with 12,300. The 33-county district covering central and northeastern Pennsylvania registered the biggest percentage increase, at nearly 39 percent.
Bierbach noted that scheduled for May 6 in Huntingdon are 38 bankruptcy cases. Those are cases from Huntingdon, Mifflin and Centre counties. He did say the number of cases was higher just prior to the 2005 bankruptcy law change, but the number is climbing.
“People may have to throw in the towel on real estate (debt),” he said. “They had been thinking they were making a prudent fiscal move by paying off credit cards, now I am seeing people being driven out of the housing market because there is no equity and they can’t make payments.”
In many areas, the housing bust piled on to people and business owners who, for years, had gotten by on credit cards and loans. Even as the number of bankruptcy filings in 2007 surpassed the amount the year before, the rate of filing picked up speed as each quarter went by, according to new figures released by the federal courts this week.
The states with the biggest increases in bankruptcy filing were those where the real estate bust hit hardest, including Nevada and California.
With the economy worsening, and home values plunging, more bankruptcy filings are expected in 2008.
(The AP contributed to this report.)