Phoenix-area bankruptcy filings drop

An odd economic trend remained in force last month as metro Phoenix bankruptcies continued to moderate despite few signs of improvement in the economy.

Valley bankruptcy filings in October rose slightly from September but fell 22 percent from October 2010 -- the ninth consecutive month of year-over-year declines. Filings are down 13 percent for the year to date, compared with the first 10 months of 2010, according to the U.S. Bankruptcy Court in Phoenix.

The same trends are apparent across Arizona, where statewide filings fell 23 percent in October and the year-to-date numbers are down 13 percent.

But the picture doesn't mean consumers and businesses are getting their finances in better shape.

"If you ask consumers if they're better off, they'll say no," said Scott Cohen, a bankruptcy attorney at Phoenix law firm Engelman Berger PC, citing surveys showing declining consumer confidence in recent months.

Also, he notes real personal income has been flat to lower lately while credit remains difficult for many consumers and businesses to obtain.

Ericka Young, a budget coach at Tailor-Made Budgets in Gilbert, feels that for many people a lack of income has become a bigger problem than excessive debts -- which might partly explain the drop in bankruptcy filings.

"If your (spending) behavior is out of line and you don't have the income to support it, bankruptcy won't necessarily help you," she said.

Besides, a lot of individuals already have gone through the worst, including bankruptcy filings, she said. Arizona has seen more than 106,000 filings since the start of 2009 -- enough to fill Chase Field twice over. Three-quarters of those have come in the Valley.

Despite the decline in filings, Cohen said many individuals are desperate, including former business owners and other once-affluent types.

"We're still seeing consumer filings tied to business failings, especially in real estate," Cohen said.

Specifically, he cited owners of once-prosperous construction firms, restaurants and other types of companies who are seeking bankruptcy protection in response to business-related lawsuits as the economic recovery has slowed.

"The banks are suing on the personal guarantees these people signed," he said. "Many are white-collar folks, business owners and other formerly high-net-worth individuals who no longer are able to hang on."

The 2,074 Phoenix-area filings in October were down from 2,658 one year earlier. For the latest month, 85 percent were Chapter 7 filings, which essentially allow debtors to start fresh after non-exempt assets are sold to repay creditors. Chapter 13 bankruptcies, which feature court-supervised debt-repayment plans, accounted for nearly all the rest.

Nationally, consumer bankruptcies in October declined nearly 20 percent from October 2010 and eased 2 percent from September, according to the American Bankruptcy Institute and National Bankruptcy Research Center.

"The declining filings correlate to tightened consumer spending and the overall pullback in consumer credit associated with a stagnant economy," said the ABI's executive director, Samuel Gerdano, in a statement.

by Russ Wiles The Arizona Republic Nov. 2, 2011 06:25 PM



Phoenix-area bankruptcy filings drop