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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: mishedlo who wrote (18845)	12/17/2004 10:05:32 AM
From: Chispas	Respond to of 116555

Meanwhile in Utah - "Bankruptcy Epidemic"..................... Bankruptcy boom may lie in legal culture By Steven Oberbeck The Salt Lake Tribune Two years ago, Utah emerged as the No. 1 state in bankruptcy filings per household. There are no easy explanations, however, about why one of every 37 Utah households filed for bankruptcy last year. The Utah Foundation, a nonprofit research organization based in Salt Lake City, is launching what it anticipates will be a long-term effort to explore Utah's bankruptcy phenomenon. The results may provide some answers to a difficult and complex p roblem. "Factors that may explain why the bankruptcy problem in Utah is so acute include larger-than-average families and homes, low wages, high charitable commitments, high rates of entrepreneurship and a legal culture that steers debtors into solutions that often fail," the foundation said in its new report, "Going for Broke: Utah's Alarming Bankruptcy Problem." Utah Foundation Executive Director Stephen J. Kroes suggests the "local legal culture," which reflects how attorneys and judges view the bankruptcy process, could play a role by affecting the type of cases that individuals file - either Chapter 7 liquidations or Chapter 13 reorganizations. So far this year, 31 percent of the cases Utahns filed were Chapter 13, which involves individuals participating in a debt repayment plan. In 2000, 40 percent were Chapter 13 filings. Nationally, 29 percent of consumer bankruptcies involve Chapter 13. One theory, Kroes explained, is that many Chapter 13 filings are unsuccessful. And when they fail, they can force families either to refile or convert to a Chapter 7, inflating the state's bankruptcy numbers. Utah State University professor Jean Lown, who beginning in 1997 conducted a five-year study of Chapter 13 filings in Utah, found that only 23.8 percent were successfully completed, compared with approximately one-third nationally. The remaining cases were either dismissed or converted to Chapter 7. "Even though a bankruptcy case fails, a family or individual may still be in financial distress, and the only viable option is to refile," Kroes said. There is good evidence nationally that local legal culture influences Chapter 13 filing rates, Lown said. She pointed to studies by Harvard professor Elizabeth Warren and Teresa Sullivan from the University of Texas at Austin. They found that Chapter 13 filing rates can vary substantially within states divided by different judicial boundaries. In 1990, for example, Warren and Sullivan reported that in the southern judicial district in Alabama, 20 percent of its bankruptcy filings were Chapter 13 cases. In Alabama's middle district, however, 66 percent of filings were for Chapter 13. The Utah Foundation study conceded that there is no definitive link between high rates of Chapter 13 filings and high bankruptcy rates overall. "Nevertheless, states with historically high bankruptcy filing rates are overly represented in the top tier of states with high Chapter 13 filings." It could be that the combination of a high rate of Chapter 13 filings plus a low rate of Chapter 13 success leads to high bankruptcy filing rates, the Utah Foundation report said, indicating more research is needed. William Stillgebauer, clerk of the U.S. Bankruptcy Court for Utah, suggested many Utahns may approach the bankruptcy process feeling an obligation to repay as much debt as possible, which at times could lead to a Chapter 13 filing when perhaps a Chapter 7 would be better. "Some may want to pay [their debts], but they could be fooling themselves, particularly if they propose a repayment plan that is so restrictive it will get derailed if even the slightest financial problem comes up," he said. steve@sltrib.com sltrib.com