by Russ Wiles The Arizona Republic Jun. 9, 2010 12:00 AM
Metro Phoenix’s bankruptcy trend improved for a second straight month in May, but it’s too early to conclude the picture has brightened.
The 2,763 filings in the metro area still were up 35 percent from May 2009.
“We hear politicians saying the recession is over, that all is well, but we’re not seeing it,” said Mark Winsor, a bankruptcy attorney at Winsor Law Group in Mesa.
Soft housing prices, a bleak employment scenario and other financial issues continue to plague many residents.
Chapter 7 filings, which provide a fresh financial start for debtors, accounted for 83 percent of the Valley total - the third straight month they’ve been over 80 percent. With ongoing employment problems, more people apparently are able to meet the Chapter 7 income-eligibility limits, attorneys say.
Chapter 13 debt restructurings, geared to people with regular job income who can’t qualify for Chapter 7, accounted for most of the rest.
Winsor said he’s noticed more owners of upscale homes seeking bankruptcy protection, yet many of these people have too much debt to qualify for either a Chapter 7 or Chapter 13 filing.
To qualify for Chapter 13, for example, a person can’t have more than $1,081,500 of secured debt or $360,525 in unsecured debt, he said. These people would have to go the Chapter 11 route, he said.
Bankruptcy attorneys elsewhere around the state also are singing much the same tune.
“I don’t see a slowdown (in the number of filings) for a while,” said attorney Daniel Rylander at law firm Robinson & Rylander in Tucson. “We’re about as busy as we’ve been.”
Tucson-area filings haven’t shown quite the same large year-over-year percentage increases as in the Phoenix area. They’re up just under 30 percent so far in 2010, compared with 47 percent here.
Rylander said that’s mainly because Tucson-area home prices didn’t rise so much during the bubble a few years ago.
“We had less far to fall,” he said.
In contrast to the situation in Arizona, the bankruptcy picture for the nation as a whole does appear to be improving.
The 136,142 U.S. consumer bankruptcies reported by the American Bankruptcy Institute and National Bankruptcy Research Center were down 6 percent from April and up just 9 percent from May 2009.