WSJ: Wave of Bankruptcies Hits States Hammered by Housing Bust

Discussion in 'Bankruptcy' started by Muggle, Jan 7, 2010.

  1. Muggle

    Muggle Guest

    The Wall Street Journal
    January 7, 2010

    Wave of Bankruptcies Hits States Hammered by Housing Bust
    By Sara Murray

    Personal bankruptcies soared last year in Western states hit hardest
    by the real-estate bust.

    In states such as California, Arizona and Nevada, where housing prices
    soared and then collapsed during the past decade, consumer bankruptcy
    filings rose roughly twice as much as the national average increase of
    32%. Homeowners fell behind on mortgages and could no longer tap into
    their home equity to pay down other debts.

    "There's a close relationship between high levels of household debt,
    including mortgage debt, and bankruptcy filings," said Samuel J.
    Gerdano, executive director of the American Bankruptcy Institute, a
    research organization made up of attorneys, accountants and other
    bankruptcy professionals. "That...has been exacerbated by the bursting
    of the housing bubble."

    In Arizona and Nevada, where bankruptcies increased most, filings
    skyrocketed by 79.6% and 59.5%, respectively. Nearly 6.2% of mortgages
    in Arizona and 9.4% of mortgages in Nevada were in foreclosure by the
    end of the third quarter of 2009, according to the Mortgage Bankers

    California saw personal bankruptcy filings rise 58.8% last year. At
    the end of the third quarter, some 5.8% of loans were in foreclosure

    Not everyone who goes through foreclosure ends up in bankruptcy and
    not every bankruptcy is driven by foreclosure. Some states with
    relatively few foreclosures, such as Utah and Wyoming, had larger
    increases in personal bankruptcies than Florida, the scene of lots of

    Mortgage troubles and job losses were primary contributors to the rise
    in personal bankruptcies last year, with the impact of both often felt
    in the same household. Makoto Shuttleworth, a California bankruptcy
    lawyer, said his clients four years ago were almost exclusively
    renters. Homeowners in financial trouble could almost always take care
    of their debts by selling their home or turn its equity into cash via
    refinancing, he said.

    As real-estate prices collapsed, Mr. Shuttleworth saw more homeowners
    come through his doors, most with steady incomes. Today, with the
    unemployment rate at 10%, he is seeing more clients whose debts have
    piled up after losing their jobs.

    --Conor Dougherty contributed to this article.
    Muggle, Jan 7, 2010
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