Utah’s Love Affair With The Bankruptcy Court: Utah Ranks in the Top 5 Bankruptcy Filing States Per Capita – April 2018

Terry Jessop & Bitner Newsletter

Issue 50, April 2018

Have you noticed how Utah has a low unemployment rate, seems to weather some financial storms better than other states and has an economy that is supposedly doing well right now? In spite of that, Utah has the fifth highest filing rate for bankruptcy per capita in the nation.*

Why do Utahns Love Filing?

There are many reasons for this, but much of it has to do with larger families, lower wages and fewer benefits than other states. Another significant factor is the amount of charitable contributions and volunteering. Two final factors are the need to “keep up with the Joneses,” with a little bit of financial illiteracy mixed in. Utah has the lowest median age of any state in the nation, nearly seven years younger than the national average. The number of children per household is also greater than the national average with nearly an additional mouth to feed per each Utah household. Utah’s per capita income is the 46th lowest in the nation with a median income for a household of three ranking 25th in the nation. Both surprising and not surprising is the fact that Utah ranks #1 among all 50 states in volunteering and charitable giving with an average of just over 10% of total income. (Where have we heard that before?) When one considers all of these statistics, it is understandable why Utahns are less likely to weather a financial setback and more likely to file bankruptcy.

What Pushes Us Into Bankruptcy

The single greatest contributing factor to the filing of bankruptcy is job loss, followed by a change in family status. Close behind are medical expenses. While Utah has one of the lowest unemployment rates in the nation, job loss continues to take its toll in the number of bankruptcies filed. The final straw that leaves the average Utahn with no alternative but bankruptcy, is that a significant portion of us have no appreciable savings, making it possible to survive a financial crisis, even one that is only temporary. Nearly six in ten Americans have less than $1,000 in savings. Close to 40% of Utahns have no savings with 55% having less than $1,000.

Older Filers and Student Loans

There has been an exponential explosion of student debt. Today, 44.2 million people have student loans in the United States totaling a whopping $1.44 trillion. The average student loan balance is $30,000 with a delinquency rate of 11.2%. Of all loan types, student loans have the highest delinquency rate. When you consider that student loans are nondischargeable under bankruptcy yet receive no priority treatment, they have the greatest potential for wreaking financial havoc in a borrower’s life. Then there are the “Gerries”. In the 1990s, there were just 1.5 bankruptcies per 1,000 filed by individuals 65 and older. Twenty-five years later, there are four times as many individuals 65 and older filing bankruptcy.

No End in Sight

As long as these factors continue to hold, we can expect Utah to remain one of the highest bankruptcy filers in the nation, whether the economy is good or bad. The current filing rate in Utah is now approaching filing rates during the recession in 2008 and 2009. As long as bankruptcies remain, the best thing to have is a good law firm that understands bankruptcy and protects creditor rights.

*Call Richard Terry for source of statistics.

© Terry Jessop & Bitner April 2018