Eastern Washington residents and businesses last year shook off a decade-long pattern of rising bankruptcy filings, pulling the total number of cases below 10,000 for the first time since 2000.
During 2004, 9,376 business and personal bankruptcies were filed in the Eastern District of the U.S. Bankruptcy Court, based in Spokane. That’s a 10 percent drop from 2003’s record 10,429 total filings, according to the bankruptcy court clerk’s office.
Since 1994, Eastern Washington’s 20 counties have generally piled up yearly records of business and personal bankruptcies. The one exception —in 1999 — showed a slight dip of 8 cases from 1998.
In the decade from 1994 to 2004, the total caseload in Eastern Washington bankruptcy court increased more than 300 percent.
Spokane County generally accounts for about 40 percent of the bankruptcies in Eastern Washington.
In 2002, Spokane County registered 4,005 total bankruptcies. In 2003 that number peaked at 4,063. Last year the total dropped to 3,254, said Jake Woodwell of the bankruptcy court’s Eastern District of Washington.
Bankruptcy attorneys say the improving economy is the primary factor in the 10 percent drop-off in 2004.
“The increase in jobs has helped people get back to work and help them pay off obligations,” said Spokane bankruptcy lawyer Kevin O’Rourke.
Spokane County gained about 7,900 jobs during 2004 compared with 2003, according to state employment department records.
O’Rourke and his father, attorney Dan O’Rourke, focus mostly on bankruptcy cases. The younger O’Rourke said he doubts their law firm has seen a 10 percent decline in its bankruptcy workload since 2003. “I can’t explain why that is. Our work has just seemed to hold steady for some reason.”
In 2003 there were 10,167 personal bankruptcies filed in Eastern Washington. Last year that number fell to 9,153, according to the bankruptcy court clerk’s office. Business filings in 2003 were 242, compared with 223 in Eastern Washington in 2004, the court reported.
Nearly all personal bankruptcies are filed as Chapter 7 or Chapter 13 petitions. In Chapter 7, a debtor’s non-exempt assets are sold off, liquidated, and distributed to creditors.
In Chapter 13 bankruptcies, individuals with regular income who want to pay off their debts are allowed to work out a repayment plan.
Most businesses file under Chapter 11, which allows the company to reorganize and remain in operation, according to Jack Reeves, who’s practiced bankruptcy law in Spokane for nearly 30 years.
Like O’Rourke, Reeves said the 2004 drop-off didn’t make a large dent in his legal practice. “In general, over the last few years I’ve seen business increase,” he said.
Reeves is careful not to give full credit for the drop in bankruptcy filings entirely to a stronger economy. Part of the decline, he said, might be due to fewer people who are eligible to file for bankruptcy protection.
“By law you’re allowed to file just one Chapter 7 every six years,” he said. “Over time, you might just be seeing our area run out of people who can file (a personal bankruptcy),” he said.
Notably, another large drop in Eastern Washington was seen in Chapter 12 filings, a category used only by financially distressed family farms. In 2003 Eastern Washington had 22 Chapter 12 filings. Last year that number fell to 3, the court clerk’s office reported.