Thursday, July 14, 2011

Bankruptcy filings in Phoenix area fall again

Phoenix-area bankruptcies fell for a third consecutive month in June despite continued sluggish employment growth and a soft real-estate market.

The 2,434 Phoenix-area filings last month represented a decline of 8 percent from June 2010.

The 14,271 individual and business filings over the first half of 2011 marked a drop of more than 7 percent compared with the first six months of 2010, according to the U.S. Bankruptcy Court in Phoenix.

Across Arizona, filings were down 9 percent in June and were nearly 8 percent lower in the first half of the year.

Bankruptcies have been heading downward since hitting a cyclical peak of 3,063 in March 2010. The numbers have decreased in 13 of the past 15 months.

Consumer debt has been easing, but many people continue to struggle with bills. For example, the American Bankers Association last week reported slightly higher delinquency rates in the first quarter in five of 11 consumer-loan categories that it tracks, including credit cards.

"With family incomes already stretched, even small increases in daily living expenses can be enough to derail the ability to meet debt obligations," said the ABA's chief economist, James Chessen, referring to rising food and gasoline prices earlier this year. "With a slow-growing economy and weak job growth, there will continue to be financial stress that will make it hard for some people to pay their bills on time."

The downward trend in bankruptcies might reflect the fact that many of the most financially strapped people already have filed.

"Most of the people who were going to get fired, already got fired," said James Portman Webster, a bankruptcy attorney in Mesa.

Other people simply lack the money to pay filing and attorney fees, he said.

Also, Webster said he senses that credit-card companies have gotten less aggressive in suing people for unpaid balances, making it less urgent for debtors to seek filing help.

"A lot of people don't deal with it until they absolutely have to," he said.

Chapter 7 filings, which allow debtors a fresh financial start after non-exempt assets are sold to pay creditors, eased 5 percent in June from a year earlier. They now represent 86 percent of all Valley bankruptcies, up from 77 percent at the start of the year.

Chapter 13 filings, which feature court-supervised repayment plans for people with regular income, accounted for most of the rest. Chapter 13 bankruptcies have come down more rapidly than Chapter 7 filings, tumbling 24 percent in June from a year earlier.

Job losses make it easier to qualify for Chapter 7 filings, which are based partly on income. Debtors generally prefer Chapter 7 filings, Webster said.

Nationally, the 119,768 consumer bankruptcies in June were down 5 percent from a year earlier but up 4 percent from May, reported the American Bankruptcy Institute and the National Bankruptcy Research Center.

For the first half of 2011, U.S. filings fell 8 percent compared with the first six months of 2010.

"The drop in bankruptcies for the first half of the year shows the continued efforts of consumers to reduce their household debt and the overall pullback in consumer credit," the ABI's executive director, Samuel J. Gerdano, said in a statement.

by Russ Wiles The Arizona Republic Jul. 11, 2011 06:51 PM

Bankruptcy filings in Phoenix area fall again

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