Utah bankruptcy filings climb 47%

Bankruptcy filings in Utah increased 47 percent in 2008 compared to 2007, and financial experts say that a combination of foreclosures, medical bills and lost jobs are likely to blame.

Statewide, 9,256 bankruptcies were filed in 2008, a significant jump from the previous year's 6,284, according to year-end numbers provided by David Sime, clerk of the U.S. Bankruptcy Court for the District of Utah.

The reasons behind decisions to file for bankruptcy have not changed, but the sheer number of people in crisis has grown, says bankruptcy attorney Tony Jones of Davis and Jones PC.

"Medical bills are certainly one reason, and loss of employment — or maybe not just job loss, but having your hours cut, or sales down for commission-type jobs," he said. "We see people in foreclosures who are trying to prevent their homes from being foreclosed on. And more people are having to use credit cards to keep their houses afloat."

Sime said that when bankruptcy experts look back at the numbers, they often look back to 2004 — the last full year before a law revamping bankruptcy took effect in late 2005 — to make comparisons. The new law greatly changed the bankruptcy process, and although bankruptcy did not "go away" as many people had believed, filing became more expensive, lawyers faced additional requirements and those seeking bankruptcy had to get credit counseling beforehand and complete a budgeting class, among other changes.

When the law changed, filings nose-dived. Utah's numbers at the time were around 21,000 cases a year. The number of cases dropped in 2006 to just over 5,000.

The numbers are now climbing, and 2008 filings rose to nearly half the pre-law-change level. The 47 percent increase is nearly twice that of the year before. Filings rose 24 percent in 2007, compared with 2006.

As for 2008, Sime noted a dramatic increase in the Chapter 11 bankruptcies, from 24 to 77. Chapter 11 is reorganization, primarily used for businesses. Only 1 percent of all bankruptcies in Utah are Chapter 11.

The most common type of bankruptcy in the state is a Chapter 7 — where assets are liquidated to pay debts. Chapter 7 cases account for 58 percent of all bankruptcy filings in the Beehive State. The number of filings increased from 3,559 in 2007 to 5,413 in 2008.

The second-largest category, Chapter 13, which allows "debt adjustment" for individuals, accounted for 41 percent in 2008 and reflected a 39 percent increase over 2007. One change in the 2005 bankruptcy law created income limitations for this type of bankruptcy.

No one filed for Chapter 12 — family farmer or family fisherman — protection last year.

There were more filings of each chapter in the fourth quarter than in previous quarters of 2008.