Tuesday, March 6, 2012

Phoenix-area bankruptcies rise in February

Valley bankruptcies rose modestly in February, snapping a three-month downward streak, as income-tax refund money allowed more people to pay attorney fees and court costs.

The 1,623 filings were up from 1,321 in January but down 11 percent from February 2011.

The general trend over the past two years has been toward fewer filings as the economy has recovered slowly and the unemployment rate has eased.

February's total was the third lowest of the past two years. Before February's numbers were released, bankruptcies had declined in eight of the 10 prior months.

For all of Arizona, the 2,160 filings in February were up from 1,795 in January but down nearly 12 percent from February 2011.

Bankruptcies typically rise in February compared with January as many cash-strapped individuals start receiving tax refunds that they can use for filing expenses.

Another reason it pays for debtors to delay filing until after they receive their tax refunds is that they can spend the money or use it to pay off student loans or other debts that won't be discharged through the bankruptcy process, said Scott Cohen, an attorney at Engelman Berger PC in Phoenix.

By contrast, when taxpayers file for bankruptcy before receiving their tax refunds, the money typically goes to pay debtor claims. This is why January generally is one of the less-active bankruptcy-filing months of the year.

Chapter 7 filings, which give debtors a fresh financial start after non-exempt assets are used to pay creditors, accounted for more than 80 percent of the February bankruptcies , inline with a long-term trend showing those filings to be the most common . Most of the rest were Chapter 13 debt reorganizations.

by Russ Wiles - Mar. 5, 2012 05:04 PM The Republic | azcentral.com

Phoenix-area bankruptcies rise in February

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