Valley bankruptcies continue decline

Despite lingering economic worries, Phoenix-area bankruptcies eased for a fourth consecutive month in July.

The 2,585 filings last month were down from 2,656 in June and a recent peak of 3,063 in March, according to the U.S. Bankruptcy Court in Phoenix.

Valley bankruptcies remain at elevated levels and still are on pace to exceed last year's 25,104 filings.

But the year-over-year comparisons have been improving, with the July 2010 total up just 11 percent from July 2009. By contrast, the March numbers were 59 percent higher compared with March 2009.

The recent easing could prove to be a summer lull. Diane L. Drain, a Phoenix bankruptcy attorney, said she expects the tally to rise in coming months, citing a spike in local foreclosures over the past few weeks. Foreclosures often are a precursor to more bankruptcies, she said.

Although unemployment is a catalyst that persuades some debtors to file for bankruptcy protection, Drain pointed to lower housing values as the main factor.

"Real estate is the biggest reason people are calling and asking for help," she said.

Some calls are from homeowners who have been using credit cards to help pay their mortgages and finally have decided they no longer can afford the home, Drain said.

"They're often at a point where all the other debt has piled up because they have struggled to service the real-estate debt, so they decide to let the house go," she said.

Other callers include people who want to keep their properties but desire a court-supervised debt-repayment plan under Chapter 13 of the Bankruptcy Code.

Joe Volin, a bankruptcy attorney in Tempe, also cites housing problems as a primary motivator.

"If a person's only problem is a first mortgage on a house, he or she rarely will need to file for bankruptcy in Arizona," he said, citing consumer protection given by the state's anti-deficiency statutes.

But in many serious cases, debtors have taken out other loans on the property, maxed out their credit cards and amassed additional IOUs, he said.

Chapter 7 filings, which provide a fresh financial start after a debtor's non-exempt assets are used to pay creditors, accounted for four in five Valley bankruptcies last month. Chapter 13 debt-restructuring plans accounted for most of the rest.

The 3,526 filings for all of Arizona were down from 3,585 in June and a recent peak of 4,135 in March. Statewide filings last month were up 11 percent from July 2009.

National bankruptcies also have been rising but at a slower pace. U.S. consumer filings in July were up 9 percent from June and 9 percent from July 2009, the American Bankruptcy Institute reported.

by Russ Wiles The Arizona Republic Aug. 13, 2010 12:00 AM



Valley bankruptcies continue decline