The number of Utahns who filed for bankruptcy during the first nine months of 2008 increased 42 percent over the same period last year, reinforcing a trend of rising insolvencies only briefly dampened when Congress passed bankruptcy reform legislation three years ago.
"We're on an upward trend that soon may take us back to the number of bankruptcies Utah was experiencing in 2005," said Bryson Despain, of the United Way of Salt Lake, which in 2006 released a study titled "Living on the Edge: Utahns' Perspective on Bankruptcy and Financial Security."
And now, Utah's slowing economy seems to be reinforcing that trend and pushing more people over the edge as well, he said.
The U.S. Bankruptcy Court for Utah is reporting that 6,597 Utahns sought the ultimate solution to too many bills and too little cash during the first nine months of 2008. During the same period in 2007 there were 4,633 Utahns who filed bankruptcy.
Despite the economic slowdown that seems to be taking hold in the state, the primary reasons Utahns have filed for bankruptcy - the loss of a job, divorce or unexpected medical bills - haven't changed, said Sherri Overby, of Financial Vital Signs, a Salt Lake company that has been approved by bankruptcy court to offer financial counseling services.
"What we have noticed a little different this year is there have been a few more people coming in who have speculated in real estate and are now looking for help," she said.
Dave Saxton, of North American Recovery in Salt Lake City, who also serves as the Utah chapter president of the American Debt Collectors Association, said many of his customers, including credit unions and some of the larger furniture retailers, have noticed an "alarming" new trend.
"A lot of their customers are now coming in and announcing they are filing for bankruptcy without ever having gotten behind on a payment," Saxton said. "It's almost as if they have realized they were living so far beyond their means for so long that there is really no way out for them."
Data from the U.S. Bankruptcy Court for Utah indicates that during the first nine months of this year that 58 percent of Utahns, or 3,841 of those who filed for bankruptcy, sought relief under Chapter 7.
Under a Chapter 7, most of a petitioner's property is liquidated and the proceeds distributed to those who are owed money.
Still, 41 percent of Utahns who sought bankruptcy court protection from their creditors filed for relief under Chapter 13, which allows debtors to formulate a plan to repay all or at least part of what they owe over a period of time, typically three to five years.
Utah Chapter 13 trustee Kevin Anderson pointed out that one of the benefits of Chapter 13 is that it allows those who file to cure any deficiencies in their mortgage payments over time.
And he attributes some of the increase in the number of bankruptcy filings so far this year to a growing number of Utahns who are trying to save their homes. "In other parts of the country where property values haven't held up as well as they have here in Utah, people seem more willing to walk away from their homes," he said.
Utah isn't alone in seeing sharply higher bankruptÂcy numbers.
Nationally, 29 percent more Americans filed for bankruptcy in the first half of 2008 compared with the same period a year earlier, according to the American Bankruptcy Institute in Virginia.
steve@sltrib.com
