Thurston County business and consumer bankruptcy filings soared in 2009, a statistic consistent with other Western Washington counties and one that shows the region still is mired in recession.
Overall bankruptcy filings in the county rose 37.6 percent to 1,152 last year from 837 filed in 2008, according to year-end data compiled by the U.S. Bankruptcy Court for the Western District of Washington.
In Pierce County, it was more of the same, with filings rising 44 percent to 4,428 in 2009 from 3,076 in 2008, the data show.
Throughout Western Washington, the year-over-year increase in bankruptcies was nearly 50 percent, making it one of the largest increases in filings since a change to federal bankruptcy laws in October 2005, said Mark Hatcher, clerk of the bankruptcy court for the Western District of Washington. Filings were higher in October 2005 because so many rushed to file before the laws changed, he said. The data show that 24,255 bankruptcies were filed last year, up from 16,281 in 2008.
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Of the Thurston County bankruptcies last year, 859 were Chapter 7, seven were Chapter 11, four were Chapter 12 and 282 were Chapter 13. In 2008, the county had 590 Chapter 7, one was Chapter 11 and 246 were Chapter 13. Chapter 7 filings are considered straight liquidations, while corporations typically file Chapter 11 to restructure debts and remain in business. Chapter 12 filings are for family farms, and Chapter 13 requires that creditors be repaid over time.
Divorce, extended illness and unemployment, even in a stronger economy, can result in bankruptcy, but all of those underlying factors have been exacerbated by the slower economy, Olympia bankruptcy attorney Jennie Patton said. The slower real estate market also hasn’t helped, she said.
“People no longer have as much equity in their home,” Patton said. “Before, they may have been able to take out a second mortgage or home-equity line of credit, but that option is not as available and they can’t get their houses sold.”
She also has noticed more people who previously enjoyed a middle- to upper-middle class life filing bankruptcy – “people who never saw themselves as being on the edge,” she added.
Morgan Ziegler, also a bankruptcy attorney in Olympia, agreed with Patton, saying he has had more clients filing for bankruptcy who previously made hundreds of thousands of dollars a year selling cars or RVs. When the economy slowed, their income didn’t just fall, it fell off a cliff, Ziegler said.
“The next thing you know, they had zero income,” he said.
Rolf Boone: 360-754-5403