Tucson-area bankruptcy filings in April jumped 85 percent from the same month a year ago, according to statics released Wednesday.
Arizonans, stung by particularly heavy job losses and housing weakness, are filing for protection at a much higher rate than Americans generally.
“People are throwing in the towel like we’ve never seen before,” said Brad Stroh, co-CEO of Freedom Financial Network, a firm with a debt-negotiation unit in Tempe that employs 250 people. “A lot of them are saying, ‘I need to hit the reset button.’ ”
There were 643 bankruptcy filings last month in the Tucson sector, compared with 348 in April 2008, according to the report by the U.S. Bankruptcy Court for the District of Arizona. Sixty-one percent of those filings were in Pima County. The Tucson sector also includes Cochise, Graham, Greenlee, Pinal and Santa Cruz counties.
The majority of the filings were Chapter 7, which is liquidation for individuals and small businesses. There were 532 Chapter 7 filings in April, a 105 percent increase over the same month last year.
Personal reorganization filings, Chapter 13s, were up 23 percent. And Chapter 11 filings, business reorganizations, jumped 40 percent over last year, though the total number is small: seven.
In the first four months of 2009, there were 2,023 filings in in the Tucson sector.
James Portman Webster, a bankruptcy attorney in Mesa, sees consumers pressured from several angles, including high credit-card debts and job losses. Even for workers who keep their jobs but face pay cuts or temporary furloughs, the income disruption can be enough to push some over the edge. “Any wiggle room some of these people had is just gone,” he said.
Webster attributes the April surge in part to the tax-return filing season, since refund money provides the cash for some debtors to pay attorney fees and other bankruptcy expenses.
Other factors might be at work, too. Stroh said he senses a shift in public attitudes toward bankruptcy, as filing for protection from creditors has lost the stigma it once had.
In years past, “People would do anything to avoid filing,” he said. “But from (General Motors) and Chrysler down to the neighbors next door, it has become the American thing to do.”
Stroh has noticed fewer people seeking to work out their financial woes through his firm’s Freedom Debt Relief unit by consolidating debt and negotiating with creditors outside of bankruptcy.
“Demand for our products is still high, but it’s off from the peak,” he said. “We often can cut their monthly payments by 50 percent, yet a ton of people can’t afford even that.”
The statewide total of 2,902 filings in April marked an 87 percent increase from a year earlier. For the entire U.S., consumer filings rose 36 percent in April from the same month a year earlier, reported the American Bankruptcy Institute, using data from the National Bankruptcy Research Center. The overall April total of 125,618 filings was up 3.5 percent from March and puts the nation on pace for 1.4 million cases in 2009.
The Arizona Republic contributed to this report.