Indiana saw fewer bankruptcies for the fiscal year ending Sept. 30 than it did the year before, with the state improving its national ranking based on case filings.
A report released this week by the Administrative Office of the U.S. Courts showed an 8-percent decrease in the number of bankruptcy filings throughout the country between Oct. 1, 2010, and Sept. 30, 2011.
Nationally, courts saw 1,467,221 cases in the latest year compared to the 1,596,355 million filed the year before. Filings dropped during the fiscal fourth quarter, with 15 percent fewer than in the same three-month period in 2010. Overall for the year, Chapter 7 filings were down 10 percent, Chapter 13 filings dropped 4 percent, and Chapter 11 filings decreased 16 percent .
Chapter 7 bankruptcies are for liquidation, Chapter 13 is for individual reorganization and Chapter 11 is for business reorganization.
In Indiana during the 12-month period, 41,199 bankruptcies were filed, including 775 business filings. That was down from 48,438 bankruptcies, including 983 business filings, the previous year.
Business bankruptcies are down because banks are more willing to work with companies to give them more time to stage a turnaround rather than liquidating or reorganizing, said Jeff Hokanson, a bankruptcy attorney at the Indianapolis office of Frost Brown Todd LLC.
Banks are choosing forbearance agreements instead of bankruptcy because, quite frankly, there's little value in the businesses or property to liquidate, he said.
"Equity is gone and bankrutpcy is about preserving value or what value is left for creditors, and there just isn't any," Hokanson said.
To an extent, the same holds true for consumers, local bankruptcy attorney Mark Zuckerberg said.
"If people aren’t working, you can’t garnish unemployment," he said. "[Bankruptcy is] to help protect assets. There’s no reason to file if there’s nothing to take from them."
The 7th Circuit Court of Appeals, which includes Indiana, Illinois and Wisconsin, saw a 10-percent drop in bankruptcy filings overall, the figures show. A total 161,182 were filed lthe previous year compared to 145,018 in the most recent one.
In the Northern District of Indiana, filings decreased 15.7 percent, from 19,538 to 16,477. Chapter 7 filings dropped 16 percent while the Chapter 13 filings decreased 13.4 percent.
In the Southern District of Indiana, overall filings decreased 14.5 percent, to 24,727 from 28,905 a year ago. Chapter 7 filings decreased 13.8 percent and Chapter 13 filings dropped 15.5 percent.
Fewer filings improved Indiana’s national bankruptcy ranking. The state ranked seventh in overall filings in the most recent year, compared to fourth the year before.
Indiana rose from third to sixth in Chapter 7 filings and dropped from 10th to 11th in Chapter 13 filings.