Utah drops to 10th in bankruptcy filings

0 Comments | Deseret News (Salt Lake City), May 11, 2007 | by Dave Anderton Deseret Morning News

Just three years ago, Utah ranked first in the nation for its rate of personal bankruptcy filings.

But today, the state's strong economy and recent bankruptcy reforms have put the brakes on the number of Utahns turning to insolvency.

At one filing per 167.4 households, Utah fell to the 10th spot in personal bankruptcy filings among all 50 states and the District of Columbia for the 12 months ended Dec. 31, 2006, according to a new report by the American Bankruptcy Institute, a Virginia-based research group.

Tennessee had the most bankruptcy filings in 2006 with one filing per 84 households. Maine had the fewest filings, averaging one per 552.3 households.

Yet Utah's filing rate still exceeds the national average, which in 2006 was one filing per 208.2 households.

Jeff Thredgold, president of Thredgold Economic Associates, said despite the improvement, Utah always will exceed the national average when it comes to bankruptcies.

"The same issues are always at play," Thredgold said. "We have 50 percent more children per adult in the state than the rest of the country. So by definition you're taking an income and splitting it into more pieces."

In addition, Thredgold said, people tend to marry younger in Utah and have children at a younger age, two aspects that contribute to more financial stress.

Utah's improvement in the 2006 rankings is nonetheless impressive. In 2005, there was one bankruptcy filing in Utah for every 39.5 households. Filings nationally and in Utah fell dramatically following new federal reforms that took effect in October 2005.

But Thredgold credits fewer filings to the state's strong job growth, income growth and rising home values.

"People have more incentive to keep their bills paid, keep their mortgage current, and they have more means to do that despite the fact of having more kids," Thredgold said.

A report in October by United Way of Salt Lake showed that many Utah households, however, are living on the edge.

Low wages, lack of health insurance and inadequate savings were cited as the top three financial worries facing Utahns, according to the study.

In addition, the report noted that one out of three Utahns is living paycheck-to-paycheck and has inadequate or no health insurance. One out of every four Utahns is struggling with major medical bills, prescription drug costs and mortgage debt.

"Even though with a booming economy, there still are a lot of middle-class folks who are being stretched financially," said Bryson Despain, director of marketing and communications with United Way of Salt Lake.

For three straight years -- 2002 to 2004 -- Utah ranked first in the U.S. in personal bankruptcy filings, according to ABI. At its height in 2003, roughly one in 36.6 Utah households filed for bankruptcy, according to the institute. In 2005, Utah dropped to third in households per filing.

E-mail: danderton@desnews.com