Local bankruptcies dip despite nationwide jump

Despite a nationwide increase in bankruptcies, the number of Chattanoogans going broke declined 6.9 percent over the past year in what may be an early ray of light in an otherwise cloudy economy, according to filings in the Chattanooga office of U.S. Bankruptcy Court.

"Bankruptcy filings tend to lag any economic recovery, so it will probably be another quarter or two before we see filings begin to ease nationwide," said Laura Beth Bartell, a bankruptcy professor at Wayne State University in Michigan and resident scholar for the American Bankruptcy Institute in Washington, D.C. "Tennessee filings were down some and hopefully that is an early sign of improvement."

Last year, Tennessee was second only to Nevada in the per capita rate of consumer bankruptcies, according to data compiled by the Federal Deposit Insurance Corp.

In the Chattanooga bankruptcy court, the number of filings in fiscal 2009 rose to the highest level since Congress reformed the bankruptcy rules in 2005. In the federal fiscal year that ended Sept. 30, however, 583 fewer individuals and businesses sought debt relief in Chattanooga's bankruptcy court compared with the previous year.

Eron Epstein, a Chattanooga bankruptcy attorney for the past 30 years, said he is staying as busy as ever, handling a growing number of cases "from people who never dreamed they would have to file for bankruptcy."

"We're seeing a lot of people now whose unemployment benefits are running out or have already run out and that is really causing a lot of panic," Epstein said. "The filings may be down a bit from a year ago, but I'm still afraid the safety net may be evaporating for a lot of people."

Nationwide, bankruptcy filings rose nearly 14 percent in fiscal 2010 over the previous year.

"As the economy looks to climb out of the recession, businesses and consumers continue to file for bankruptcy to regain their financial footing," American Bankruptcy Institute President Samuel Gerdano said. "With unemployment hovering near 10 percent and access to credit remaining tight, total filings in 2010 will likely exceed 1.6 million."

Many middle-class individuals are being pushed into bankruptcy by lost jobs, falling income and declining home values.

The Consumer Credit Counseling Service of Chattanooga, a division of the Partnership for Families, Children and Adults, added a family financial counseling service a year ago to help many of those displaced from their jobs and in need of outside help for the first time in their lives.

Linda Rath, the family financial counselor hired to staff the new service at the organization, said she counseled nearly 150 families in the first year of the program, persuading the Partnership to extend the program at least another year.

"Most of the people I counsel never thought they would be in this type of situation, so we're trying to let them know the type of services and assistance that is available," she said. "I think the economy locally is showing some progress, but it's still very slow and painful and there are still a lot of people unable to find work or return to the type of lifestyle they had before this downturn," she said.

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