Personal bankruptcies on the rise
Maclyne Josselin might catch the eye of any corporate comptroller looking to build a staff, keeping a ledger within arm’s reach in which she tracks income and expenses to the penny.
Josselin’s business these days is managing her own personal finances — and “profits” have been exceeding “losses,” a welcome change from just a few years ago.
Despite an improving jobs market, and slightly higher wages and savings in Fairfield County in the past year, not to mention low oil prices and a surging stock market in the macroeconomy, personal bankruptcies rose 5.8 percent in the region last year to just over 1,500.
The local increase comes in the context of a 12.2 percent drop nationally in people seeking protection from creditors, and underscores a fragile economic recovery that is still causing pain for many, amid slow wage growth and high costs of living in Fairfield County.
While financial crises can strike from any number of directions beyond one’s control –job loss, health problems and family demands, to name a few — Josselin said she edged toward the financial cliff by living paycheck to paycheck on a nonprofit employee’s salary without eyeballing what she was spending, and was unable to save anything.
Josselin, a Stamford resident, said she was able to make the conscious decision to reverse her course, but it was difficult.
“It’s like breathing,” Josselin said, describing the habit she has honed of tracking her expenses daily. “Just getting started was the hardest part.”
With nothing to lose, Josselin began attending a free clinic on personal finance that the Women’s Business Development Council offers at its headquarters in Stamford, as well as at satellite offices in Danbury, Shelton and Hartford.
Jill Russo Foster runs WBDC’s personal financial education and budget coaching programs, and has written multiple books on personal finance, including “Thrive In Five: Take Charge of Your Finances In Five Minutes A Day.” She became an expert on the topic the hard way, saying she accumulated 27 credit cards while in her 20s before the inevitable financial disaster hit, requiring a couple of years to work to fix her credit problems.
Josselin would eventually hammer out a plan that worked to control her spending by tracking every penny — literally — that she pays out. She keeps it all in a binder she has titled “Young, Fabulous and Saving,” deriving it from the Suze Orman book “The Money Set for the Young, Fabulous & Broke.”
From student to tutor
Today, Josselin is one of WBDC’s volunteer budget coaches, having tutored three people to date in a half-dozen, one-on-one sessions spanning three months. It was intimidating at first, she said, with her first client a woman many years her senior.
Foster said about half of the people who go through the program have income putting them below the official federal poverty. Of the remaining half, she said she has counseled spouses with combined income as high as $190,000, who have fallen on hard times due to health issues, divorce or other calamitous life events.
WBDC’s advanced budget coaching sessions for people in financial crisis entail four major tenets. Perhaps surprisingly, the easiest is reducing debt, while the hardest is improving one’s credit score, mainly due to the fact it is hard to move that needle in the six-week span of the program. The other two legs of the stool are increasing one’s income-to-expenses ratio and boosting savings.
Of those who register for WBDC’s budget coaching programs, 85 percent say they have changed their spending habits. Though Foster would like to close that 15 percent gap to zero, it nevertheless is making a difference. With a staff of 16 people, five part-timers and volunteers, WBDC helps as many people as it can.
Since 2005, when Connecticut experienced a surge of bankruptcy filings before Congress stiffened rules on who could qualify, statewide bankruptcies have stayed in rough lockstep with the economy. From just under 4,000 filings in 2006 –likely an abnormally low number due to people filing in advance of the new rules — personal bankruptcies marched steadily upward to peak at nearly 11,250 cases in 2010, before receding each year to 6,750 cases last year.
Behind most of those cases there is an individual or family who has hit rock bottom, unable to make ends meet whether due to a lost job, medical bills, poor planning or bad luck.
Foster said there are common traps many people fall into, including deciding to postpone payment of a bill coming due in order to be accumulate funds to pay it off in full. Better to pay some of it right away and the rest when one is able, she said.
A utopian world
Hand in hand with bankruptcy is home foreclosure, with Corelogic tracking nearly 5,240 foreclosure proceedings in Connecticut for the 12-month period through February.
Both bankruptcy and foreclosure data can be influenced by external factors, according to Mark Stern, a Fairfield attorney who chairs the Bankruptcy Law Committee of the Fairfield County Bar Association. Those factors can include changes in bank policies regarding foreclosures or judicial retirements resulting in a backlog of cases.
Stamford state Superior Court Judge Douglas Mintz told Connecticut legislators in February that in 2012 and 2013 an increasing number of people participated in a foreclosure mediation program mandated in 2008 by the state. He said the program has helped 15,000 Connecticut families stay in their homes — 69 percent of whom signed up for mediation — and requested that the state make the program permanent.
“It would be a wonderful, utopian world where, you know, I would not have to do a foreclosure docket on a Monday morning,” Mintz said. “Even in the good times, people get sick and lose their job.”
WBDC CEO Fran Pastore said her organization had initially intended to end the budget coaching sessions led by Foster once the economy gained steam again, but now intends to keep it in place.
“We can’t even meet the demand of the number of people who want to get into the program,” Pastore said. “The despair is so real and it is very much alive ” a sense of despondency, despair — nowhere to turn.”
Josselin said she was able to turn it around just by taking the first step, and the next, and the next. She is now sharing her experience with others, and Foster suspects more will make the transition from student to tutor on what can be a long, hard road to financial stability — one people from up and down the various walks of life have traversed.
“What I try to tell people is that there is no shame or guilt about what happened in the past,” Foster said. “Just come in and start addressing it.”
Alex.Soule@scni.com; 203-964-2236; www.twitter.com/casoulman