The number of Nebraskans filing for bankruptcy fell for the sixth-straight year in 2016, to its lowest level since 2005.
There were 4,105 bankruptcies filed in the Nebraska District of the U.S. Bankruptcy court. That was a 3.6 percent decrease from 2015.
Bankruptcy filings in the state have now fallen every year since 2010, and they hit their lowest level since 2005, the year federal bankruptcy law was changed to make it harder to file.
Two potential trouble spots were Chapter 11 business reorganizations, which grew from 9 in 2015 to 16 in 2016, and Chapter 12 farm bankruptcies, which grew from 8 to 12.
However, despite the increases, those numbers remain small by historical standards.
Nebraska's numbers last year were similar to those nationally. According to the American Bankruptcy Institute, overall bankruptcies fell 6 percent nationwide compared with 2015. That was the seventh-straight yearly decline and the lowest level since 2006. Commercial bankruptcies, including Chapter 11 filings, were up 26 percent.
Whether the overall drop in bankruptcies is a trend that can continue is unclear.
American Bankruptcy Institute Executive Director Samuel J. Gerdano said an uptick in bankruptcies in 2017 wouldn't be a surprise.
“As the Fed raises rates in 2017 and the cost of borrowing increases, more debt-burdened consumers and businesses may seek the financial shelter of bankruptcy,” he said in a news release.
However, Creighton University economist Ernie Goss said a rise in borrowing costs by itself is not likely to cause an increase in bankruptcy filings.
"Yes, rising interest rates will produce more loan defaults. However at this point in time, rates are expected to increase by no more than 0.75 percent in 2017," Goss said in an email. "This is unlikely to force significantly more bankruptcies/defaults."
He said that kind of a rise in rates is unlikely to have much of an effect on non-ag borrowers because the non-farm economy continues to expand in Nebraska.
One potential danger, Goss said, is a big jump in inflation of 3.5-4.5 percent or more.
"Then interest rates will rise at a rate that does increase defaults significantly," he said. However, Goss said he expects inflation to remain below 3 percent this year.
A bigger risk, at least in Nebraska, is the ag economy, with farm income predicted to have dropped about 17 percent last year. Continued low crop prices have meant less cash for farmers, who have been borrowing more and have seen their cash cushions dwindle.
Still, Goss said, the rural bankers he surveys monthly don't see big problems on the horizon.
Despite the drop in income, bank CEOs are predicting only a 5 percent increase in ag loan defaults this year. Most borrowers are asking for and receiving loan restructurings, Goss said.