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Local, State Bankruptcies Are Surging

October 12, 2008

By JACK GILLUM

Tight credit, economy clamp Arizona in vise

Bankruptcy filings have soared during the last few months in Southern Arizona, an unsettling reality as consumers and businesses are grappling with a tougher economy and tighter available credit.

Last month alone, 329 Chapter 7 claims were filed in U.S. Bankruptcy Court in Tucson, an increase of about 112 percent compared with September 2007.

Statewide, that number increased in September by 120 percent over the same month last year.

“Anyone that relies on any form of credit is being affected,” said Jon Saffer, a bankruptcy attorney with the firm Snell & Wilmer. He said that includes people from residential builders to ordinary consumers.

“If you don’t have the cash-purchasing power, whether it’s to buy bananas or aircraft, you’re affected because you can’t get the credit – or because the cost of your credit is increasing,” Saffer said.

Bankruptcy Court statistics show that the more-common claims – Chapter 7 and Chapter 13 filings – have risen every single month this year compared with last.

Those statistics include an 81 percent increase last month in Southern Arizona Chapter 13 filings, which allow a debtor to keep property and pay debts over time.

A search of bankruptcy cases during the last few months shows that the tight economy has indeed squeezed everyone, including single people, families, investors and small businesses.

Bruce Graff, the owner of Emerald Glass Inc., said his business filed for Chapter 11 protection in part because of a downturn in the residential glass market and because a couple of his contractors also filed for bankruptcy.

“Typically, the phones were ringing off the hook” for residential work, he said. “But today, we didn’t get one of those calls.”

Still, he remains optimistic his business can emerge from bankruptcy reorganization, adding that if the economy improves, “I can see light at the end of the tunnel.”

Experts say individuals in particular can avoid bankruptcy by consolidating debt or selling off unneeded assets. But in this economy, with the proliferation of subprime and adjustable-rate mortgages, it is harder for consumers nowadays to stay afloat.

Arizona individuals and businesses made 10,570 filings for all types of bankruptcies in 2007, up 63.2 percent from 2006. In Tucson, total filings increased by 56 percent.

TYPES OF BANKRUPTCY

Bankruptcy case types are named for the chapter of the U.S. Bankruptcy Code (U.S. Code Title 11) that governs them:

* Chapter 7: Personal or business liquidation, in which remaining assets are entirely sold off to repay creditors

* Chapter 11: Filing, usually by businesses, in which the debtor generally submits a reorganization plan to restructure assets and debts.

* Chapter 13: A reorganization plan for individual wage earners, in which the debtor develops a plan to repay all or part of his or her debts.

Source: U.S. Bankruptcy Court, District of Arizona.

* Contact reporter Jack Gillum at 573-4178 or at jgillum@azstarnet.com.

Originally published by JACK GILLUM, ARIZONA DAILY STAR.

(c) 2008 Arizona Daily Star. Provided by ProQuest LLC. All rights Reserved.




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