Mid-year bankruptcy filings down

An improved jobs climate has helped cut federal bankruptcy filings in Wisconsin to their lowest level in nine years.

For the first time since before the Great Recession, the number of consumers and businesses declaring themselves insolvent was below 10,000 at mid-year.

“I think it’s the economy,” said Robert Waud, a bankruptcy attorney with Esser Law in Milwaukee. “I think people have gotten back to work.”

From January through June this year, there were 9,058 federal bankruptcy filings in the state, down almost 11% from 10,162 in the first half of 2015, data from U.S. Bankruptcy Court shows.

The last time Wisconsin had fewer than 10,000 bankruptcy filings halfway through a year was 2007, when there were 7,642.

As the recession and its aftermath took hold, bankruptcies peaked at nearly 30,000 for the full year 2010. They’ve been declining ever since, and may continue that direction, said Claire Ann Resop, a bankruptcy attorney in the Madison office of Oshkosh-based Steinhilber, Swanson LLP.

“I think it’s going to stay at a steady rate or even drop a little more,” she said.

The downward trend in Wisconsin is more pronounced than nationally. In the U.S. overall in the first half of 2016, bankruptcy filings declined about 6% from the same period in 2015, according to the American Bankruptcy Institute.

In Wisconsin, almost three-fourths of bankruptcy petitions were Chapter 7 filings, the type intended to give people a fresh start by wiping out debt such as overwhelming medical bills, utility bills and credit card balances.

While job loss, divorce and major medical expenses traditionally are the three biggest causes of consumers filing for bankruptcy, losing a job has lessened as a reason as the economy has improved.

“It’s easier for people to get financing. It’s easier to work out defaults that are happening. The real estate market is active. The unemployment rate is good,” Resop said.

Wisconsin’s unemployment rate peaked at 9.2% in 2010. In June, the state's unemployment rate was 4.4%.

Trades people who lost their jobs during the recession and housing crash now are in demand as home building picks up.

Financial professionals put out of work have been getting hired.

“They’ve been getting jobs again, and jobs with decent money,” Resop said.

Waud said new bankruptcy filings will stay at lower levels if job opportunities remain available.

“As long as they’re meeting their demands and their bills, you are going to see fewer and fewer clients,” he said.

One type of bankruptcy that appears on pace to be filed as much this year as it was in 2015 is Chapter 13. In a Chapter 13 bankruptcy, individuals with regular income develop a plan to repay all or part of their debts over three to five years. One advantage of a Chapter 13 bankruptcy is that it gives consumers a chance to save their home from foreclosure.