Phoenix bankruptcy rates improved in June

by Russ Wiles The Arizona Republic July 9, 2010 12:00 AM

The Valley's bankruptcy situation improved for a third straight month in June, with filings now showing their lowest year-over-year increase since the recession began.

Metro Phoenix recorded 2,656 consumer and business filings, down 3.9 percent from May, according to the U.S. Bankruptcy Court in Phoenix.

Perhaps more significant, the June figure was up just 15.7 percent compared with June 2009. That's the lowest year-over-year rise since October 2006, one year after a filing spike related to a change in bankruptcy law.

Some local attorneys have sensed a filing slowdown but aren't sure how long it will last.

"June was quieter than, say, March, but July so far has been pretty busy," said Dean Dinner, a bankruptcy attorney at Nussbaum & Gillis in Scottsdale. "It's hard to say whether we've just gotten through one wave with another wave to come."

Dinner cited job losses and real-estate woes as two main catalysts forcing people to seek protection from creditors.

"What we're seeing is broad-based," he said.

"It's not just developers and construction companies but a lot of other businesses, too, including restaurants, gas stations, convenience stores and clothing stores."

Nor are filings focused among those in lower economic groups.

"People are coming in who had fairly high incomes, and now, their incomes have dropped or disappeared entirely, yet they still have large homes and business obligations," Dinner said.

The improvement has come despite several recent indicators pointing to a slowing economy. These include drops in consumer confidence, new-home sales and job creation.

As in the Valley, bankruptcy filings throughout Arizona dipped for a third straight month, to 3,585 in June, down from 3,731 in May and a recent peak of 4,135 in March. Statewide filings in June were up 15.5 percent from June 2010.

Nationally, bankruptcy filings have been slowing for several months.

The June total of 126,270 was up nearly 9 percent from a year earlier but down 8 percent from May of this year, according to the American Bankruptcy Institute and National Bankruptcy Research Center.

The job backdrop will almost certainly continue to exert a major influence on bankruptcies. Although the picture has stabilized, economists aren't expecting a quick recovery.

"We expect the unemployment rate (in Arizona) to remain high for the foreseeable future," Eugenio J. Aleman, a senior economist at Wells Fargo, wrote in a report.

The state lost nearly 300,000 jobs from the peak a few years ago, he said. Plus, personal incomes here run about 16 percent below the U.S. average.

"The Arizona economy is coming back from the brink this year after suffering the worst slump in decades," Aleman wrote.

"However, this recovery will not be strong, nor will the Arizona economy come out unscathed."



Phoenix bankruptcy rates improved in June