Credit Lawsuit News
June 7, 2012
Bankruptcy news isn't all negative
Metro Phoenix bankruptcies rose to a nine-month high in May amid signs the economy is slowing.
However, the uptick was modest, and the latest numbers remain in line with what appears to be a stabilizing pattern.
The number of people and businesses seeking bankruptcy relief in metro Phoenix rose to 2,080 in May from 1,999 in April, according to U.S. Bankruptcy Court for the District of Arizona. It was the third increase in the past four months.
The 69,000 jobs created nationally in May was the lowest number in a year, and other signs indicate a slowdown, including a small decline in some forward-looking U.S. economic indicators. Job losses and chronic underemployment are key factors that cause debt-laden people to file for bankruptcy.
A possible rise in metro Phoenix foreclosures could point to more bankruptcy filings later in the year, predicted Phoenix attorney Diane Drain, who has noticed more people facing large medical-related debts.
Still, the number of new bankruptcies remains well below this time in 2010 and 2011, suggesting that filings are stabilizing. Nearly 16 percent fewer bankruptcies were filed in May than in May 2011, and Valley filings have dropped year-over-year for 16 months.
With filings stabilizing, "We're starting to see younger, less experienced attorneys get out of the (bankruptcy) market because they can't get the amount of business they expected," Drain said.
Statewide filings mirrored the metro Phoenix trend. Arizona bankruptcies rose to 2,856 in May from 2,703 in April but declined nearly 14 percent compared with May 2011.
Chapter 7 filings, which offer a fresh financial start after a person's non-exempt assets are used to pay creditors, accounted for more than 85 percent of metro Phoenix filings in May, in keeping with another well-established trend. Chapter 13 debt-reorganization plans accounted for most of the rest.
Metro Phoenix home prices have started to increase, and foreclosures have dropped sharply over the past year.
"However, one note of concern comes from the number of foreclosure starts -- homeowners receiving notice their lenders may foreclose in 90 days," according to a recent report from the Center for Real Estate Theory and Practice at Arizona State University.
When foreclosures rise, bankruptcy filings tend to increase after a lag of a month or two, Drain said.
Michael Weston provides Debt Lawsuit Defense in all cities of Arizona, USA including:
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