Total bankruptcy filings in the Southern District of Indiana ticked down last year. Business bankruptcies in Indiana dropped 3.2 percent.

Bankruptcy filings in Indiana dipped slightly in 2010—the first decline in four years—and showed a late-year slowdown that may indicate consumers are starting to manage their finances better.

Filings in the Southern District of Indiana totaled 28,901 last year, a slight 0.2-percent decrease from 2009, according to statistics released earlier this month by the Alexandria, Va.-based American Bankruptcy Institute.

Total bankruptcy filings in the district fell last year for the first time since 2006, a year after bankruptcy reform became law.

Even so, Mark Zuckerberg said his local bankruptcy practice continues to thrive.

“It’s still a little harder to file,” he said, referring to 2005 reform that made it more difficult to wipe away debt. “But if they’ve lost their job or can’t pay their bills, they still have to do something.”

Statewide, total bankruptcies in 2010 dipped to 47,304, a 2-percent decline from 2009, according to ABI.

Indiana still ranked 10th in the nation last year in terms of total bankruptcy filings. California (260,210), Florida (113,066) and Illinois (82,669) topped the list.

Signs of a downward trend may have become more pronounced late last year. Filings in the fourth quarter of 2010 dropped to 6,164 in the district, a nearly 7-percent decline from the same quarter the previous year. Statewide, fourth-quarter filings fell from 11,081 to 9,941, a 10-percent drop.

Total bankruptcy filings in the United States increased to nearly 1.6 million in 2010, an 8-percent increase from the previous year, ABI said. But the growth rate of bankruptcy filings eased after three years of double-digit growth.

“The slowing of the growth rate of bankruptcies reflects a retrenchment in consumer spending associated with a down U.S. economy,” ABI Executive Director Samuel J. Gerdano said in a written statement.

Business bankruptcies nationwide decreased 7.5 percent in 2010, to 56,282. Chapter 11 filings dropped the most, falling 14 percent last year, to 11,774.

In Indiana, business bankruptcies totaled 918 in 2010, a 3.2-percent dip from the previous year.

The number of business bankruptcy filings by type—Chapter 7 liquidation and Chapter 11 reorganization—weren’t available for each state or district.

Jerry Ancel, co-chairman of Taft Stettinius & Holliste’s business restructuring group in Indianapolis, said he's seen Chapter 11 filings falling within his practice, but only because businesses often don’t have the means to restructure.

“There hasn’t been a lot of asset-based capital in the past couple of years,” he said. “[Chapter 11] just becomes less of a viable tool.”

Despite the poor economy, total bankruptcy filings in the Southern District still remain relatively low compared with the early years of last decade.

From 2002 to 2004, bankruptcies annually numbered 32,000 to 35,000 before surging to 47,710 in 2005, when bankruptcy reform became law that October.

This story originally ran in the Feb. 28 IBJ Daily.