Phoenix-area bankruptcy filings climbed in February

Phoenix-area bankruptcy filings climbed in February

by Russ Wiles The Arizona Republic Mar. 9, 2010 12:00 AM

Bankruptcy filings climbed in February after a dip in January as more debt-strapped individuals apparently used income-tax refunds to get the ball rolling.

Filings in the Phoenix area have been hovering around 2,000 a month for the past year as a sluggish economy puts pressure on people who are unemployed as well as certain business owners and homeowners who have suffered big losses in real estate.

"Maybe the recession
is ending, but a lot of them just aren't making it," said Mark Winsor, a bankruptcy attorney at Winsor Law Group in Mesa.

The 2,064 filings last month were up from 1,886 in January, but that well below the recent peak of 2,496 in October. The latest tally marked a 51 percent rise from February 2009.

Chapter 7 filings, which allow debtors a fresh start after non-exempt assets
are sold to pay creditors, accounted for four in five bankruptcies last month.

Chapter 13 debt-repayment plans accounted for most of the rest.

In past years, filings picked up once debtors got tax-refund money that they could apply to attorney fees and court costs.

Bankruptcy filings are running higher in the Valley, with its real-estate dependant economy, than elsewhere in Arizona or nationally.

In February, the nearly 112,000 U.S. filings were up 14 percent on a year-over-year basis, and 9 percent from January, according to the American Bankruptcy Institute.

Excluding the Phoenix area, filings elsewhere in Arizona were up 27 percent in February compared with a year earlier.

Winsor said there are concerns in Arizona's legal community about whether homeowners who agree to short sales could be sued by lenders down the road for their deficiencies.

Winsor said he believes current law may protect homeowners in short-sale situations if the loan was used to purchase that property.

He added that a test legal case might be needed to clarify the issue.

Meanwhile, for people who want to know for sure they're getting rid of their primary-residence debts, he's advising them to declare bankruptcy or to walk away from their dwellings rather than risk a possible future lawsuit.