Arizonans filing for bankruptcy up 60 percent
Russ Wiles
The Arizona Republic
Jul. 16, 2007 04:26 PM
Debt-strapped consumers are
filing for bankruptcy protection in rising numbers, with the first-half tally in Arizona up nearly 60 percent.
Credit-card debt, higher mortgage payments, costly medical bills and other factors are driving the trend.
Still,
bankruptcy filings are well below the record highs seen before a change in applicable laws made it more restrictive to file.
Some 895 applications were filed in the U.S.
Bankruptcy Court for Arizona in June, the highest monthly total of 2007.
That raised the first-half filing sum for the state to 4,618 from 2,894 in the first half of 2006.
Filings in the Phoenix metro area rose 51 percent in June and were 55 percent higher for the first half, at 3,109.
"A number of people in subprime loans, with adjustable rate mortgages that are resetting, just can't afford to make the new (higher) payments," said Phoenix attorney Diane L. Drain, a bankruptcy expert and governor of the State Bar.
She also cited relatively new federal rules that require customers to make higher minimum payments on credit-card balances each month.
Yet Mike Sullivan, director of education at Phoenix debt-counseling firm Take Charge America, said he doesn't think the trend toward higher minimum payments has been a significant factor pushing people toward bankruptcy.
Rather, he cited the real estate slump and softer home values for removing a safety valve in the form of home-equity loans, which previously could be tapped to pay other debts.
"I'm alarmed by the number of people who are forced to give up (and apply for bankruptcy) because they have fewer options," he said.
Most bankruptcies involve consumers. Chapter 7 filings, which allow for liquidation of non-exempt assets to pay off debts and start fresh, account for more than half the total, but Chapter 13 filings are rising at a faster clip. They involve debt-repayment plans for people with regular income.
A change in bankruptcy laws in 2005 reduced the scope of protection and required consumers to seek
credit counseling.
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