Bankruptcy filings declines in Eastern Washington, for time being
Experts, data suggest increase on horizonJuly 3rd, 2019
Bankruptcy filings in Eastern Washington and North Idaho have been declining for nine consecutive years but may be set to increase by the end of this year, some attorneys who monitor such filings here say.
The U.S. Bankruptcy Court’s Eastern District of Washington reported a total of 1,490 filings in the first five months of 2019, down from 1,576 filings in the year-earlier period, a decrease of 5.4%.
However, data show 2019 filings are projected to reach a total of 3,575 filings, which would be a slight increase of 0.7 %.
This year’s first five months of bankruptcy filings in the Eastern District included 1,139 Chapter 7 cases, the most common form of bankruptcy through which filers seek liquidation of assets. The district’s first five months of Chapter 13 filings, which enable a person to present a plan of financial reorganization, numbered 328.
The court’s Eastern District consists of the 20 counties in Washington state located east of the Cascade Mountains.
Bankruptcy activity in Spokane County showed a total of 489 cases in the first five months of 2019, a 9.4% decrease from a total of 540 reported for the same time period in 2018.
Spokane-based bankruptcy attorney Elizabeth McBride, of Elizabeth M. McBride PS, says that while bankruptcy filings still appear to be declining overall, she feels an increase is on the horizon.
“Even though the data show a nearly 10% drop in bankruptcy filings over last year, I think it’s going to start picking up again for several reasons,” she says. “The biggest one is that people are still struggling to find housing as rents go up and wages stay the same. If they can’t even afford rent, their other bills go unpaid, and we start to see a tipping point.”
While the number of filings her firm has seen this year has remained relatively steady, McBride says she has noticed an increase in Chapter 13 filings.
“With home values going up, banks are moving more on foreclosures,” she says. “So, we’re getting more calls from people seeking help filing Chapter 13 bankruptcies, which gives them time to catch up on their mortgage and avoid foreclosure.”
The U.S. Bankruptcy Court District of Idaho’s Northern Division, which is based in Coeur d’Alene and includes Kootenai, Benewah, Bonner, Boundary, Clearwater, and Shoshone counties, reported a total of 62 bankruptcy cases for the first five months of 2019, down 15% from the 73 cases in the year earlier period.
The Northern Division had 53 Chapter 7 filings for the start of 2019, down 14.5% from the 62 reported in 2018.
Despite the data showing a decline in filings so far this year, Hayden-based bankruptcy attorney Jeff Andrews, of Jeff Andrews PC, says his firm continues to see a consistently high volume of bankruptcy cases.
“In my view, filings have remained fairly steady over the last several years, and I feel there will be an uptick in filings again in the coming years,” he says.
Andrews says he believes the two biggest factors that could lead to an increase in bankruptcy filings in the coming years are rising housing and health care costs.
“When people think of bankruptcy, they think of people who are bad at managing money, but that’s not the case,” he says. “Most of the budgets I look at show clients with fixed costs and reasonable expenses that are consistent with current markets, it’s the income side that’s the problem.”
Andrews says he believes current housing costs in North Idaho are disproportionate to wage scale, with rents and home values both being higher than most can afford.
“People may qualify for financing to buy a home, but their wages are such that their budgets don’t allow for unexpected expenses,” he says. “They then start to use credit cards to supplement their income, which starts a cycle of debt that they’re unable to keep up with.”
Similar to McBride, Andrews says he has noticed an increase in the number of clients filing for Chapter 13 bankruptcy.
“For some, it might appear to make more sense to file for a Chapter 7 from a budget standpoint, but if they’ve already done that in the last few years, they may not be eligible to do so again,” he says.