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An irony of life in the Beehive State is that a place built on pioneer principles of self-reliance and hard work also consistently leads the nation in banruptcy filings, with one of every 37 households seeking the ultimate solution to their financial problems.

The reasons Utahns file for bankruptcy in such prodigious numbers are complex, but one thing is clear: In Utah, national economic forces and local culture combine to create a problem worse than anywhere else in the nation.

A statistical analysis by The Salt Lake Tribune of bankruptcy cases filed from July 1, 2003, to June 30, 2004, indicates many of the pressures individuals face prior to filing are closely linked to Utah's unique heritage. The state's residents often are influenced by precepts of The Church of Jesus Christ of Latter-day Saints, of which the majority of Utahns are members. Many marry younger and have larger families.

The Tribune's analysis found nearly two-thirds of bankruptcy filers have one or more dependent children, making them twice as likely to be supporting children younger than 18 as the average household nationally. Utahns face the financial responsibilities of home-making and supporting a family early in life when they are just embarking on their careers and earn little.

Couples with growing families are eager to own homes, yet with half the state's working population earning $28,840 a year or less, that dream often can be achieved only if couples overextend themselves financially.

Utahns who ended up in bankruptcy court reported paying an average of two-thirds of their total gross monthly income on housing expenses in the months leading up to their financial collapse.

And even before they ran into financial problems, families that eventually ended up in bankruptcy court were paying 35 percent of their gross monthly incomes for housing - well above the 30 percent maximum recommended by the Utah Housing Finance Agency and the Federal Housing Administration.

Complicating the housing picture is Utah's relatively close-knit religious communities and the pressure that places on many families, particularly the young, to keep up with their neighbors, says Paul Godfrey, an ethics professor at Brigham Young University.

"In Utah, people know their neighbors better than they do in New York or Los Angeles," he says. "When someone down the street gets a water-skiing boat, a lot of people in the neighborhood will know about it, creating pressure on others to keep up with their relevant social group."

Among the LDS population, pressure also exists for active members to tithe a tenth of their incomes to the church. About 13 percent of Utah bankruptcy filers reported tithing in the year prior to going broke, with 12 percent of those reporting tithes to the LDS Church.

Such religious beliefs may provide a glimpse into why many Utah families choose to spend their money as they do. But even those insights do not completely explain what is happening on an individual, case-by-case basis.

In many ways, Utah debtors look like consumers across America, says Jean Lown, a Utah State University professor who, with colleague Barbara Rowe, has studied the state's bankruptcy problem. "Utahns are drowning in debt," she says.

Nationwide, consumer debt - excluding mortgages - reached $2.02 trillion at the end of the second quarter of 2004, or approximately $19,000 per household, according to the Federal Reserve.

The easy availability of credit and the resultant consumer debt, which the American Bankruptcy Institute reports is directly related to the number of bankruptcy filings in the United States, is not lost on Utah attorneys who practice bankruptcy law.

"Years ago, when I needed to borrow some money, I remember going down to Dial Finance where a loan officer sat me down and made me go over my expenses and income. He wanted to make sure I was in a position to pay them back," says Duane Gillman, a Salt Lake City attorney who specializes in bankruptcy law.

The proliferation of credit cards throughout the economy changed the way many financial institutions do business. Credit cards are everywhere. Issuers freely extend credit to poor college students and even high school students.

"Banks have gotten rid of all those guys" who used to help young consumers gain an understanding of personal finance issues, Gillman says. "They [young consumers] certainly aren't getting educated on that subject in the schools . . . It breaks my heart to see some 20 or 21-year-old having to file for Chapter 7 because they got into debt over their head."

The Federal Reserve estimates 76 percent of all American families have at least one credit card. In contrast, 82 percent of Utahns who filed for bankruptcy during the 12-month period ended June 30 reported they were carrying balances on charge card accounts.

Yet it isn't just revolving credit-card debt that causes problems for Utah consumers.

The Tribune's analysis paints a picture of families living paycheck to paycheck when they are grounded by an unexpected job loss, a medical crisis, business failure or divorce - forces or events that typically contribute to bankruptcy everywhere.

Hairdresser Angie Parks faced such a financial tempest when she divorced after 13 years of marriage.

"We had everything in both our names and were paying the bills on time," Parks says. "After my ex-husband lost his job, though, there were a lot of problems. I was able to pay my part of the bills, but he wasn't able to pay his."

Parks, a mother of two, eventually filed for Chapter 7 bankruptcy. "I had to sell the house, but I'm doing better now."

Nearly 20,000 such tales emanate from the U.S. Bankruptcy Court for Utah every year.

Unlike most Utahns who filed for bankruptcy, Pailani Hyatt of Magna eschewed the use of credit cards. "They are the quickest way I know to get into financial trouble. I never had any use for them, although I've received lots of offers."

Her reticence to take on such debt, though, didn't prevent her identity from being stolen by her ex-husband's girlfriend. "Things got to be such a mess that bankruptcy was the only way out. I wouldn't have filed if I didn't have to."

For large numbers of Utahns who file for bankruptcy each year, a common thread runs through many of their cases.

For those who were holding down jobs when they sought bankruptcy protection, just less than 40 percent - or two of every five filers - experienced a sharp decline in their yearly employment income in the previous three years - a factor that helps explain why many Utahns were paying so much of their income on house payments at the time of their bankruptcy filings.

Although 85 percent of bankruptcy filers were gainfully employed when they walked into court, the median take-home pay - which means half of Utahns filing brought home more and half less - was just $1,577 a month, or $18,918 a year. That income was not enough to cover average monthly living expenses of $2,126.

Those figures highlight one of the basic problems that continues to contribute to the large number of personal insolvencies in the state - low wages, Gillman says.

"We are the guys, after all, who shot Joe Hill," Gillman says, referring to the controversial labor activist for the Industrial Workers of the World - the Wobblies - executed by firings squad in 1915 for murdering a store keeper. "Utah skipped the labor movement."

The changing nature of Utah's economy appears to be another contributing factor in bankruptcy rates, for young and old.

As Utah's real estate values and rents have gone up, the state's employment mix increasingly is skewed toward lower paying jobs. Utahns who filed for bankruptcy earned on average about $26,000 per household.

"The bankruptcy phenomena in Utah remains extremely complicated, more so than in other states," says Godfrey at BYU. "But in Utah, there is no smoking gun to explain why so many people file for bankruptcy. There are a lot of factors involved."

INSIDE

Why are we unique?

l Utahns who file for bankruptcy typically are married, have children and hold jobs, albeit at the lower end of the pay scale. Here's how financial pressures associated with families make Utahns vulnerable when job loss or other catastrophe occurs.

MONDAY

Credit & medicine

l Medical calamities, low wages and credit card debt are culprits in personal bankruptcy filings nationwide. How does each of these factors figure in Utah's position as the bankruptcy capital of the nation?

TUESDAY

Are you at risk?

l How do your finances compare with those of bankrupt Utahns? If you're in trouble, what are your options? If filing for bankruptcy is the best alternative, what will it cost? How long will it take?

What type of Utahn files for bankruptcy?

About the series

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