This is an archived article that was published on sltrib.com in 2011, and information in the article may be outdated. It is provided only for personal research purposes and may not be reprinted.
Bankruptcy filings in Utah jumped 15 percent in the first three months of 2011, as thousands of the state's residents continued to struggle with the aftereffects of the Great Recession.
But some of the reasons for the increase might surprise you one expert said Utah's improving job picture may have contributed.
Even though "it may seem counterintuitive, when the economy starts to improve and people begin to find jobs after being unemployed, it can lead to an increase in filings because they realize they have assets that they now are in a better position to protect," said Jean Braucher, a law professor at the University of Arizona and a resident scholar at the American Bankruptcy Institute in Virginia.
For others, the downturn might just be catching up to them.
Bankruptcy court trustee Kevin Anderson said that during the past year, he has noticed a trend among Utahns who have filed for Chapter 13 a type of bankruptcy that 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.
"We've been seeing a lot more people with higher incomes filing for Chapter 13," Anderson said, noting that about three-quarters of them had median incomes more than the state average of $56,000 annually, while prior to that, the majority had incomes below that level.
"Were I to speculate, I would say that many of those who are now filing started out with a little bit better financial cushion than a lot of people, but that the economy is just now catching up with them," Anderson said.
To be sure, there are still plenty of Utahns in financial distress, and regardless of the reasons, the U.S. Bankruptcy Court for the District of Utah received 4,639 bankruptcy petitions in the first quarter, compared with 4,020 during the same period a year ago, said clerk David Sime.
"Unfortunately, we're still seeing a steady increase in filings," he added.
Sime pointed out that if the 15 percent increase in petitions continues through the rest of this year, Utah will finish 2011 with approximately 21,000 filings, or roughly the same number as in 2005, before the nation's bankruptcy law was changed to make filing more difficult.
Nationally, bankruptcy filings were actually down 6 percent, quarter over quarter, but that doesn't necessarily represent a total reversal in the upward trend of filings since 2005.
"Bankruptcy filings are still elevated, but we do seem to be seeing some effect from the restrictions that resulted in consumers getting less credit a couple of years back," Braucher said. "Nationally, 2011 may be the first year since 2005 when bankruptcy filings go down."
Of the 4,639 bankruptcy petitions filed in Utah during the first quarter, Sime said that 35 percent sought Chapter 13. The remaining 65 percent were for Chapter 7, which involves a trustee liquidating a debtor's assets and distributing the proceeds to creditors. Any remaining debts are wiped out, and a debtor receives a fresh financial start.