Utah year-to-date bankruptcies spike over same period from '09

SALT LAKE CITY — The number of Utahns filing for bankruptcy during the first nine months of 2010 soared 27 percent from the same period last year, outpacing the U.S. gain of 11 percent>.

The Salt Lake Tribune reports that 13,603 Utahns and 1.17 million Americans have filed for bankruptcy so far this year in a sign that families continue to struggle in an ailing economy.

David Sime, clerk of the U.S. Bankruptcy Court for Utah, said the latest state numbers reflect a "continuation of the upward trend in bankruptcy numbers" seen over the last several years.

Brent Hatch of the Family Financial Education Foundation — a counseling service based in Evanston, Wyo., that advises consumers in Utah and other states — said some people have credit debt and others are struggling to keep homes.

"And about half those that we are seeing have medical debts that they are unable to pay," Hatch told the Tribune. "We are seeing people who desperately want to pay their debt but have found themselves in financial trouble."

Bankruptcy is viewed as a lagging economic indicator because filings reflect what happened to personal finances one to two years ago.

That helps explain why Utah's bankruptcy rate this year has risen at a faster clip than the national rate, said Jeff Thredgold, economic consultant to Zions Bank.

"Utah was a little late in entering the national recession, so you would expect that we would be seeing higher levels (of bankruptcy filings) a little later than the rest of the country," he said.

Of Utahns who have filed for bankruptcy this year, 67 percent sought relief under Chapter 7, which involves a trustee liquidating a debtor's assets and distributing the proceeds to creditors. Any remaining debts are wiped out, and the debtor gets a fresh start.

The remaining 33 percent sought Chapter 13 bankruptcy, which allows consumers to formulate a plan to repay all, or at least part, of what they owe over a period of time.

Sam Gerdano, executive director of the American Bankruptcy Institute, said filings nationwide for the first three quarters of 2010 mark the highest total since 2005 when Congress passed sweeping bankruptcy laws.