Utah bankruptcies soar 62 percent over first nine months of 2009
Utah's struggling economy and the accompanying high unemployment rate is exacting a bitter financial toll on the lives of thousands of the state's residents.
The U.S. Bankruptcy Court for Utah has reported it received 10,706 bankruptcy petitions during the first nine months of 2009. That's a staggering 62 percent increase from the same nine month period a year ago.
Utah isn't alone.
Bankruptcy filings nationally surged past the 1 million mark during the first nine months of 2009. It was the first time that seven-figure number has been hit in any nine-month period since the overhaul of the nation's bankruptcy laws in October 2005, according to the American Bankruptcy Institute, a nonprofit research organization that studies issues related to insolvencies.
"Bankruptcy filings continue to climb [nationally] as consumers look to shelter themselves from the effects of rising unemployment rates and housing debt," said Samuel J. Gerdano, executive director of the American Bankruptcy Institute.
Sherri Overby at Globous Financial Relief, a Salt Lake City-based company that provides counseling to those who are considering filing for bankruptcy, said many Utahns now seeking help are hoping to save their homes from foreclosure.
The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 required, among other things, that those seeking bankruptcy receive credit counseling before they file. Then they have to take a personal financial-management class before their cases can be dismissed.
"We're counseling a lot of Utahns who have lost their jobs and are trying to save their homes. But unfortunately it is often the case of closing the barn door after the horse has left," she said. "A lot of people coming in were overextended even before they lost their jobs."
In addition to other Utahns who are struggling to pay unexpected medical bills or have too many credit-card bills, Overby said Globous also is seeing an increasing number of Utahns who are trying to deal with burdensome debt obligations related to their businesses.
"They pledged to personally guarantee loans for their businesses, and with the recession things have gone bad for them," Overby said.
There is a flip side, though, to some business bankruptcies.
It isn't unusual for the assets used by business seeking bankruptcy court protection to be picked up by other business owners who want to expand their own operations.
And that is what Joe Timmons, the owner of Harley-Davidson Buell of Salt Lake City is doing.
He recently struck a deal to acquire the building in Lindon that houses Timpanogos Harley-Davidson, an operating arm of Tupelo Investments, which filed for Chapter 11 in early September.
"It is a good location," Timmons said, indicating he is hoping along with the building to eventually acquire that Harley-Davidson dealership. "Regardless, I plan to sell motorcycles out of there. The only question is, what kind."
Still, personal bankruptcies this year dominated the filings in the U.S. Bankruptcy Court for Utah through the end of September.
And since the first of the year, 65 percent of Utahns who sought relief from the debts filed for Chapter 7 bankruptcy. That involves a trustee liquidating a debtor's assets and distributing the proceeds to creditors. Any remaining debts then are wiped out and the debtor gets a fresh start.
The remaining 35 percent of Utahns who filed petitions for debt relief with the court sought Chapter 13 bankruptcy, which allows financially troubled consumers 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.
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