A bright spot in bankruptcies?

Bankruptcy filings are up this year in northeast Nebraska, including the Omaha area, but the increase has been far higher in the rest of the state.

Although job losses and the slumping economy contribute to the bankrupty increase, economists and lawyers aren't sure why there's a difference within the state, which is split between U.S. Bankruptcy Courts in Omaha and Lincoln.

Filings through August were up only 4 percent over the same period of 2008 for the 14 counties in the northeast: Douglas, Sarpy, Cass, Cedar, Cuming, Washington, Dodge, Burt, Dakota, Dixon, Knox, Pierce, Thurston and Wayne.

In the rest of the state filings were up 23 percent.

As a bankruptcy attorney in McCook, Bert Blackwell is on the front lines of the recession battle.

“The major reason for more bankruptcies is reduced income,” Blackwell said. “Either one or both wage earners are working reduced hours compared to what they used to work.”

The collapse of the housing market and the recession have resulted in more bankruptcy filings nationwide, although Nebraska and Iowa have fared better than many parts of the country.

Creighton University econom-ics professor Ernie Goss said he was surprised by the modest increase in filings so far this year in the region where Omaha dominates. “I would have expected them to rise,” he said.

The increase in the rest of Nebraska, where people file bankruptcy cases at the Lincoln court, is easier to explain, Goss said.

The U.S. Agriculture Department has said farm income nationwide is expected to shrink by 38 percent as demand and prices drop for grain crops, livestock and dairy products. Corn that sold for $6 to $7 a bushel last year is closer to $3 a bushel this year.

“As farmers earn less, they buy less,” Goss said, which hurts implement dealers and other businesses that rely on farmers and ranchers as customers.

Chapter 7 filings — liquidation of personal or business assets to pay debts — make up the bulk of bankruptcy filings, with 1,560 filed through August in the Omaha district out of 2,406 total filings, and 2,138 filed in the Lincoln office out of 2,645 total filings.

Chapter 13 filings for individuals repaying all or part of debts make up a large portion of filings as well, with 834 filed in the Omaha office through August and 475 in Lincoln.

The number of Chapter 11 bankruptcy filings, typically filed by businesses, supports Goss' hypothesis about farm income, although that bankruptcy category has a small number of cases, making it subject to wide percentage variations if numbers vary only slightly.

Eighteen Chapter 11 cases were filed by people outside the Omaha district through August of this year, double the number filed in all of 2008.

By contrast, in the Omaha district there were nine Chapter 11 cases in the first eight months of 2009, compared with 18 in all of last year.

Farmers typically file Chapter 12.

There were 14 cases of Chapter 12 bankruptcy filed by people living outside the Omaha district during the first eight months of 2009. In all of 2008, there were 16 such cases. In the Omaha region, only one Chapter 12 case has been filed so far this year, after one in 2008.

Eric Thompson of the University of Nebraska-Lincoln's Bureau of Business Research said he doesn't know why the Omaha region would have fewer bankruptcy filings, beyond the recession's more moderate impact on the state in general.

“I don't believe Omaha has really outperformed the rest of the state in terms of the economy,” he said.

Fewer people in Nebraska had subprime mortgages and other problem loans than in the rest of the country, Thompson said. State unemployment, at 5 percent, is among the lowest in the country. The national jobless rate is 9.7 percent.

Allan Jenkins, an economics professor at the University of Nebraska at Kearney, and bankruptcy attorney John Turco of Omaha suggested that the recession hit the state's urban areas first and just now is fully affecting rural areas.

Or it could be a blip, they said.

“Some short-term variability in the local rate of bankruptcies is probably not meaningful,” Jenkins said.

Jim Nisley and Andrew Snyder, bankruptcy lawyers in North Platte and Scottsbluff, said cases have increased since late last year.

“I think we're starting to get the effects of last year's economy,” Nisley said. “It's like a tidal wave that starts on the coasts and heads here.”

Thompson said that overall Nebraska will continue to ride out the recession better than other parts of the country.

Farm income won't be great this year, but it won't be terrible either, said Thompson, noting that 2007 and 2008 were exceptionally profitable years.

Personal bankruptcy cases in Nebraska spiked in 2005. People who might have been undecided about filing did so to avoid more stringent federal regulations that took effect in October 2005.

Turco said the state's 12,100 bankruptcy filings in 2005 cleared the decks for a while. People filed 4,154 cases in 2006.

The number of bankruptcy filings across the state has climbed since then, Turco said.

According to statistics from the U.S. Bankruptcy Court, filings across Nebraska rose by 22 percent in 2007 and 25 percent in 2008, with the Omaha district and the rest of the state increasing at about equal rates.