The number of bankruptcies filed in Wichita declined in 2012 for a second year in a row.
There were 3,662 bankruptcies of all kinds filed last year at the federal courthouse in Wichita, which typically sees filers from all over southern, central and western Kansas. The figure reflects a 12.6 percent drop from 2011 and a 21 percent decline from the peak year of 2010.
“We’re not as busy as we have been, and that’s not a bad thing,” said Jeff Witherspoon, director of the Consumer Credit Counseling Service, a nonprofit that sees many of the individuals who file bankruptcy.
The local decline is similar in scale to a 14 percent national decline in bankruptcies.
Local legal professionals attributed the decline mainly to the length of the downturn.
But others took a more optimistic view, seeing it as an indication of the community’s improving economy.
Wichita area employment has risen 4,000 to 5,000 jobs – between 1 or 2 percent – during the year.
Attorney Bill Zimmerman said he thinks a lot of people finally figured out how to adjust to their circumstances – and they sold a car, found a second job, moved in with parents, or did whatever they could to make ends meet.
But there’s also something else going on, he said.
“The big collection agencies have backed off because there is nothing to get by high pressure tactics,” he said. “They’re waiting for the economy to get better so there will be something to garnish.”
Attorney Ed Nazar agrees, saying Wichita is dividing into the economically secure and economically insecure. And the insecure – the long-term unemployed and the working poor facing financial crises – are getting poorer, he said. The decline in bankruptcies simply reflects creditors understanding of that.
“I think that what we have are folks that have had such a retrenchment in their economic condition in term of loss to jobs and financial resources that it is not cost effective for creditors to pursue litigation, there’s no immediate pressure to pursue them.”
Since the downturn more people have filed Chapter 13, which allows those in financial trouble to shed some debts and come up with a plan to repay the rest. The repayment schedules can last from three to five years.
It is usually an attempt to hang onto a home, said Kendra Davis, legal assistant for attorney Mike Studtmann. But it often doesn’t work. They have to come back in a year to remove the house from the repayment plan and put it into foreclosure.
But by far the majority of people coming into their office these days are drained, Davis said.
“Mostly, it’s people who are just really broke,” she said.
Witherspoon added that he just returned from a credit counselors conference in which there was much concern about yet another debt bomb: student loans. Many unemployed people went back to school in the recession, borrowing the money, in the hopes the economy would pick up by now. Students loans, by law, cannot be discharged in bankruptcy.