Phoenix-area bankruptcy outlook improves

Amid a stabilizing job market, the Valley's bankruptcy picture in January improved for the ninth time in the past 10 months, with total filings dropping to a one-year low.

But the 1,985 metro-Phoenix filings last month reported by the U.S. Bankruptcy Court in Arizona show many residents continue to struggle with debt - the latest filing count was still up 5 percent from January 2010.

What has emerged is a mixed picture of improvement but at elevated levels, with Arizona seeing slower progress than the nation overall, where filings have touched a two-year low.


Clearly, many Americans are doing a better job managing IOUs, but the overall debt reduction also stems from credit-card issuers tightening their eligibility rules and lowering credit limits on many customers, said Kevin Gallegos, vice president of operations at Freedom Debt Relief in Tempe.

Unemployment and underemployment continue to be factors that cause people to seek assistance with debts or bankruptcy protection, he said. Arizona's unemployment rate, which stands at 9.4 percent, has been trending lower in recent months, though employment gains have been weak.

Chapter 7 bankruptcies, which give debtors a fresh financial start after assets are used to pay creditors, accounted for three in four Valley filings last month. Chapter 13 debt-repayment plans accounted for most of the rest.

January bankruptcies for all of Arizona totaled 2,599 - also marking the ninth month of improvement in the past 10 months and the lowest total in a year.

Still, Mark Winsor, a bankruptcy attorney at Winsor Law Group in Mesa, predicts filings will remain elevated this year. He cited recent reports suggesting Valley foreclosures could rise a bit this year compared with 2010.

If that's the case, Winsor said, lenders on home-equity lines of credit or other second loans could pursue borrowers after their homes foreclose, prompting those people to seek bankruptcy protection for remaining deficiencies.

Winsor said he's noticing more upscale bankruptcy clients, including those pursuing uncommon Chapter 11 filings.

The bankruptcy trend nationally has improved more overtly. U.S. consumer filings in January declined 9 percent from a year earlier, reported the American Bankruptcy Institute and National Bankruptcy Research Center.

The latest monthly tally of 92,669, down 22 percent from December, marked a two-year low.

by Russ Wiles The Arizona Republic Feb. 15, 2011 12:00 AM





Phoenix-area bankruptcy outlook improves