Utah bankruptcies fall 77%

Utah bankruptcy filings in 2006 fell to their lowest level in 21 years, a result of new bankruptcy legislation that has frightened away consumers and left some attorneys closing their doors.

Total bankruptcy filings in 2006 — including business and personal filings — fell to 5,031, down 77 percent from 21,784 in 2005, according to the U.S. Bankruptcy Court for the District of Utah.

The last time filings were lower was in 1985, when 4,433 filings were made, according to David Sime, clerk of the U.S. Bankruptcy Court for the District of Utah.

The decrease in filings has led some bankruptcy attorneys to close their doors or pursue other areas of the law.

Jory Trease, a Salt Lake bankruptcy attorney, said the new law is having a drastic impact on bankruptcy attorneys. He estimates that at least half of all attorneys who were representing debtors have moved on to other areas.

"The new law is so full of ambiguity and contradictions," Trease said. "There is no question at all that this law has backfired on everybody. I cannot believe that Congress passed this law."

Whatcott, Barrett & Hagen, a Salt Lake-based law firm that handled only bankruptcy cases, stopped taking new cases in 2006, nearly three months after the new reforms became law in October 2005.

Dave Berry, a bankruptcy attorney in Murray, said his firm's caseload is about one-fourth of what it was before the reforms went into effect. Berry said he blames fewer filers not only on the new law, but also on a good economy.

Berry said he had 11 staff members prior to the new law, but now employs just four people.

"At one minute you were paying overtime and the next moment you had nothing and it was layoff time," said Berry, who added that in his 20 years as an attorney, 2006 was the worst year in terms of the number of clients walking through his door.

"We've reduced overhead. We've reduced our advertising," Berry said. "Yes, my paycheck is dramatically affected."

At the bankruptcy court in Salt Lake City, Sime said he has not let go any of his staff, yet.

"The courts have taken a wait-and-see approach," Sime said. "I don't know whether filings will increase again, but nationally they are saying they will come back."