Utah Bankruptcies Are on Pace to Set Annual Record

Source: Knight Ridder/Tribune Business News Publication date: 2000-10-11 Arrival time: 2000-10-12

Oct. 11--Utah's economy is growing but so is the number of Utahns overwhelmed by personal debt.

A record number of Utahns turned to the U.S. Bankruptcy Court for Utah during the first nine months of 2000 seeking the ultimate relief from too many unpaid bills.

William Stillgebauer, clerk of the Utah bankruptcy court, reported 11,136 petitions were filed through the end of September, a 6 percent increase over the same period a year ago.

If that pace continues, Utah will finish the year with a new annual record number of bankruptcy filings, he said.

Economists who track bankruptcy statistics indicate the number of bankruptcy filings nationwide is closely related to personal debt levels. And some say during economic boom times and periods of low unemployment, consumers tend to spend slightly beyond their means. In 1998, total personal bankruptcy filings nationally reached a record 1.38 million. Last year, however, filings fell to 1.26 million.

But that lull may be over, suggests Keith Leggett, senior economist with the American Bankers Association.

The amount of money Americans are spending to service their debts is increasing nationwide, one indicator bankruptcy filings soon will pick up, he said.

SMR Research Corp., a New Jersey-based market research and forecasting firm that specializes in consumer-finance issues, predicts bankruptcy filings will increase 10 percent to 20 percent next year.

The company expects bankruptcy data nationally for the third quarter of 2000 to show a slight increase in personal filings followed by a much stronger increase in the fourth quarter that will establish an upward trend.

What we are now seeing is the effect of the new interest rate cycle, SMR President Stuart Feldstein said in a recent company forecast. Rising interest rates make it more expensive for consumers to borrow money and harder to pay off credit-card and other interest-rate-sensitive debt.

Feldstein said interest-rate movements are not the major cause of bankruptcy filings, but do modify the trend. Changes in long-term interest rates tend to impact the bankruptcy rate with about a one-year lag, so rising rates in 1999 are now starting to hit home. SMR Vice President George Yacik said Tuesday that consumers also are now being affected by higher heating and energy costs.

Of the 11,136 bankruptcy petitions filed in Utah during the first nine months of this year, 40 percent were from individuals and couples who sought to repay their debts over time under Chapter 13. The majority of Utahns filing for bankruptcy so far this year sought to walk away from the debts by filing Chapter 7. Under Chapter 7, a court-appointed trustee auctions off a person's assets and distributes the proceeds to creditors.

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-- Carl Jenkins (Somewherepress@aol.com), October 14, 2000