Valley bankruptcies spiked in March

by Russ Wiles The Arizona Republic Apr. 10, 2010 12:00 AM

Valley area bankruptcy filings hit a new cyclical high in March, despite some encouraging national numbers suggesting that the strains on consumers might be easing.

Filings in the Phoenix metro area rose to 3,063 in March, up 59 percent from a year earlier and an increase of 999 filings from the February 2010 total.

"We remain as busy as can be," said Pernell McGuire, an attorney at law firm McGuire Gardner, which has offices in Tempe and Flagstaff.

March filings normally rise from February as tax-refund money arrives, giving debt-strapped individuals the cash to pursue bankruptcy protection.

But last month's Valley total was the highest since October 2005, when a crush of filings preceded major changes to the nation's bankruptcy laws.

Chapter 7 filings, which allow for a fresh financial start for debtors after non-exempt assets are used to pay creditors, accounted for nearly 83 percent of the Valley total in March, with Chapter 13 reorganizations accounting for most of the rest.

McGuire said he's also noticing an uptick in Chapter 11 business reorganizations, which he attributes to the depressed state of the commercial real-estate market.

"Their tenants who run small businesses often are forced to close," he said of building owners. "They're not there to pay the rent, so landlords don't have the cash flow."

There were 68 Chapter 11 Valley filings last month compared with 37 in February and 44 in March 2009.

The Valley's bankruptcy surge came despite a rare report of national job creation last month and an upbeat consumer-delinquency report.

The American Bankers Association noted a decline during the fourth quarter in the proportion of consumer loans that were 30 days or more past due, including a notable dip in credit-card delinquencies to 4.39 percent from 4.77 percent in the third quarter. Some of the improvement likely reflected consumer debt write-offs by lenders.

National bankruptcy filings in March also rose to a post-2005 high, with the 149,268 filings, up 34 percent from February's figure and 23 percent from March 2009.

Arizona had 4,135 filings, up 53 percent from a year earlier.

Valley bankruptcies spiked in March