Phoenix-area bankruptcy filings jump 91%
Signs of an economic recovery aren't showing up in the latest bankruptcy statistics.
Phoenix-area filings jumped 91 percent in April compared with a year earlier, pushing above 2,000 a month for the first time since bankruptcy laws were changed in late 2005.
Arizonans, stung by particularly heavy job losses and housing weakness, are filing for protection at a much higher rate than Americans generally.
"People are throwing in the towel like we've never seen before," said Brad Stroh, co-CEO of Freedom Financial Network, a firm with a debt-negotiation unit in Tempe that employs 250 people. "A lot of them are saying, 'I need to hit the reset button.' "
The 2,107 Valley filings in April compared with 1,104 in April 2008, according to data released Wednesday by the U.S. Bankruptcy Court in Phoenix.
More than four in five were Chapter 7 filings, which allow debtors a fresh financial start after non-exempt assets are distributed to creditors. Chapter 13 debt-repayment plans accounted for most of the rest.
James Portman Webster, a bankruptcy attorney in Mesa, sees consumers pressured from several angles, including high credit-card debts and job losses. Even for workers who keep their jobs but face pay cuts or temporary furloughs, the income disruption can push some over the edge.
"Any wiggle room some of these people had is just gone," he said.
Webster attributes the April surge in part to the tax-return filing season because refund money provides the cash for some debtors to pay attorney fees and other bankruptcy expenses.
Other factors may be at work, too. Stroh said he senses a shift in public attitudes toward bankruptcy, as filing for protection from creditors has lost the stigma it once had.
In years past, "people would do anything to avoid filing," he said. "But from (General Motors) and Chrysler down to the neighbors next door, it has become the American thing to do."
Stroh has noticed fewer people seeking to work out their financial woes through his firm's Freedom Debt Relief unit by consolidating debt and negotiating with creditors outside bankruptcy.
"Demand for our products is still high, but it's off from the peak," he said. "We often can cut their monthly payments by 50 percent, yet a ton of people can't afford even that."
The statewide total of 2,902 filings in April marked an 87 percent increase from a year earlier.
For the entire U.S., consumer filings rose 36 percent in April from a year earlier, the American Bankruptcy Institute reported, using data from the National Bankruptcy Research Center. The overall April total of 125,618 filings was up 3.5 percent from March and puts the nation on pace for 1.4 million cases in 2009.