During the course of last year, signs began emerging that a growing number of consumers in Utah and elsewhere in the country increasingly were cutting back on use of credit and were eager to rid themselves of excess debt.
During the first half of 2011 the number of Utahns who declared themselves insolvent with the U.S. Bankruptcy Court was up 11 percent, compared with the first half of 2010. During the final half of the year, however, filings declined 6 percent.
And during the fourth quarter of last year, the number of Utahns who filed for relief was down 12 percent from the previous year.
Nationally, bankruptcy filings were down 12 percent throughout all of last year, according to the American Bankruptcy Institute, a nonprofit Virginia-based organization that tracks insolvency filings and the issues surrounding them.
Last year marked the first significant decline in bankruptcy filings nationwide since Congress passed the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005.
The law, designed to make it more difficult for consumers to file bankruptcy, initially resulted in a sharp decline in the number of filings. Since then, though, the number of consumers filing for bankruptcy steadily increased until last year.
"The decline in total filings [nationally in 2011] reflects the retrenchment in consumer spending associated with a down U.S. economy," Samuel Gerdano, executive director of the American Bankruptcy Institute, said in a statement.
Gerdano suggested that as consumers continue to pay down their debt and as access to credit remains tight, bankruptcy filings should continue to decline.
Preston Cochrane, president of the AAA Fair Credit Foundation, which provides counseling services to financially challenged Utahns, said his organization also is starting to see signs that more Utahns are cutting back on their use of credit, and are eager to reduce their personal debt burdens.
"We began noticing early last year that there were a few more people coming in who had already started to cut back" on their use of credit, Cochrane said. "And we also noticed that some of the banks and third-party debt collectors seemed a little more willing to offer options to help those they were working with eventually pay off their debts."
The Federal Reserve Bank of San Francisco reported much the same trend.
It noted in its latest "Consumer Credit Conditions" report that overall consumer debt in Utah declined in the third quarter of 2011 (the latest data available), a trend that was consistent with what was happening nationally.
"The average debt per consumer (excluding first mortgages) in Utah was close to $16,700, which was lower than the national average of roughly $17,200," the Fed said.
Although it noted that total consumer and revolving (credit card) debt have fallen in Utah since their peaks in 2009, the levels remains above those from the earlier part of the decade.
Of those who filed bankruptcy petitions in Utah during 2011, 66 percent sought relief from debts under Chapter 7, which involves a trustee liquidating a debtor's assets and distributing the proceeds to creditors. Any remaining debts are wiped out, and the debtor gets a fresh start.
The remaining 34 percent sought Chapter 13, which allows the financially troubled to formulate a plan to repay all, or at least part, of what they owe over a period of time, typically three to five years.
Considering filing for bankruptcy?
P The U.S. Bankruptcy Court for Utah's website at www.utb.uscourts.gov offers answers to frequently asked questions. Click on the "Public Resources" tab to access the information.