Colin Mansfield hates owing money.
In 2005, he had been unemployed for a few years. He burned through most of his previously sizeable savings and accrued crippling credit card debt.
"It was about $30,000. It was a lot of money for me," he said.
Mansfield could have gotten his debt cancelled by going through bankruptcy. With that much of it, he was a good candidate. But instead, he decided to hunker down, pay off the credit card and avoid a filing. He found ways to bring in money through a variety of jobs, including teaching and composing music.
Now, at 64, Mansfield is penniless again. He can't find work and his savings account is empty. He draws disability payments from the government because of arthritis and depression. He just started receiving food stamps.
But this time bankruptcy isn't an option. It just wouldn't help Mansfield. He doesn't have any debt and he refuses to borrow. He won't charge daily expenses to a credit card, even though he's desperately short on cash.
"The idea of getting into debt again is frightening, and I would do whatever I can not to do that," he said.
Colin Mansfield's allergy to debt after owing tens of thousands helps explain why bankruptcies are plunging .
Bankruptcies have been on the decline in Minnesota since spiking during the recession. So far this year, filings are about 35 percent below their 2010 peak. The reasons for the drop are complicated — and they're less tied to a recovering economy than you might think.
"One reason I think bankruptcies are declining now is that people aren't carrying a lot of debt on their household balance sheets, so there's not a lot bankruptcy can do for them," said Robert Lawless, a bankruptcy expert at the University of Illinois.
During the recession, Lawless said, the foreclosure crisis played a big part in causing bankruptcy filings to spike. But foreclosures also ended up wiping out a lot of household mortgage debt. That happened at the same time that Americans pulled back on spending and borrowing money, if they could even get a bank to lend to them.
As debt levels drop, so do bankruptcies.
Lawless says it may seem odd, but improvements in the job market likely are not a factor reducing bankruptcies. "People tend to look at bankruptcies as a measure of the overall strength of the economy, and I think that's a mistake."
There can still be plenty of people in financial distress when the bankruptcy rate is low, said Melissa Jacoby, a bankruptcy expert at the University of North Carolina. Some people might not be able to afford filing. Reforms enacted in 2005 made it costlier, she added.
Jacoby says it probably sounds counterintuitive, but bankruptcies often rise when an economy is soaring. Credit standards loosen; people spend more and take on more debt.
"One of the big peaks that people often commented on was in the mid '90s when filings first exceeded 1 million and the big question then was how could filings exceed 1 million at a time of such prosperity," Jacoby said.
A recent study by the Federal Reserve Bank of New York shows that Americans are starting to feel more confident about out taking on credit card debt. Another Fed report says lenders are starting to make credit a little easier to come by.
But for now, the slight change in attitude towards credit isn't helping Twin Cities bankruptcy lawyers.
Attorney Ron Lundquist says client calls are down. And in a lot of cases, he's just helping customers sort through a bad financial situation — instead of preparing their bankruptcy filing.
"We can help them to get over where they are right now and perhaps not get back into that situation in the future," he said.
Lundquist says a growing share of his clients do have a huge amount of debt — in the form of student loans. But that kind of debt is extremely difficult to dump in bankruptcy.