PRESS RELEASE
December 15, 2004

Going For Broke: Utah's Alarming Bankruptcy Problem

Utah Foundation today released its December Research Report examining Utah's bankruptcy problem. The Executive Summary and the full version of the December report are available at: www.utahfoundation.org/reports.html.

The purpose of this report is to provide a historical overview of the bankruptcy situation in Utah as well as to highlight various national and local theories of the causes of bankruptcy that may illuminate why Utah has the highest household bankruptcy rate. This report addresses many different factors that may be salient to the bankruptcy phenomenon in Utah and major findings include:

• Utah has consistently ranked in the top quarter of states with high bankruptcy rates since the 1960s.
• During the 1980s, a wave of bankruptcy filings pushed Utah into the top 10 "worst" states. Since 1998, Utah has been in the top 5 "worst" states.
• In 2002 and 2003, Utah emerged in the top position, replacing Tennessee with the highest household bankruptcy rates.
• Theories on the causes of bankruptcy vary from high home prices relative to income, increasing credit card debt, fiscally irresponsible citizens, declining personal savings and a decline in the stigma associated with bankruptcy.
• Economic factors that may play a strong role in Utah's bankruptcy problem include larger than average families and homes, low wages, high home prices, and high charitable commitments.

Report author Holly Farnsworth said "It is shocking to say that nationally bankruptcies have grown from one bankruptcy per 481 households in 1960 to one bankruptcy per 67 households in 2003. Utah has not been immune from this trend and has fared worse than the rest of the country."

Executive Director Steve Kroes said, "Utah's position at 'number one' in bankruptcies is troubling to many of us who think of Utahns as socially responsible, self-sufficient people. The initial reaction to Utah's bankruptcy problem is often to blame irresponsible, over-consuming debtors, but our research shows it is much more complicated than that."

According to Farnsworth, "One surprising reason that helps explain Utah's high bankruptcy rates is a local legal culture that seems to push debtors into more Chapter 13 bankruptcies which require some repayment of debts as opposed to Chapter 7 which relieves a debtor of all obligations. The problem with this is that more than half of the Chapter 13 filings do not reach successful completion, and we believe this leads to a high rate of re-filing of bankruptcies. These multiple bankruptcies could be exaggerating our rate as compared to other states."

Farnsworth continued, "There are economic factors, however, that play into our high bankruptcy filing rate, such as low wages and relatively expensive housing compared to those low wages."

In the coming year, Utah Foundation and other organizations will continue to explore the bankruptcy problem to ascertain specifically what is causing bankruptcies to be more prevalent in Utah than in other states.

Utah Foundation is a nonprofit, non-advocacy research organization. Our mission is to encourage informed public policy making and to serve as Utah's trusted source for independent, objective research on crucial public policy issues. Learn more and view research reports at www.utahfoundation.org.

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