Bankruptcy filings boom

Inland Northwest residents caught between unemployment and decreasing home prices filed bankruptcy last year in numbers not seen since the law was overhauled in 2005.

Filings in the U.S. Bankruptcy Court for Eastern Washington jumped 31 percent, to 7,234.

The increase closely tracked the 32 percent increase in bankruptcy filings reported Monday for the nation as a whole.

In North Idaho courthouses, bankruptcy filings soared by 56 percent, to 1,441. That’s more than a fourfold increase since 2006, when changes in the bankruptcy code drastically reduced filings.

Spokane attorney Bruce Boyden said he has seen more wealthy clients seeking bankruptcy protection than in years past.

Many own homes worth more than $300,000 that could be borrowed against when they needed cash, or sold if they could no longer make the payments, he said.

With high-end homes among the hardest hit by the real estate downturn, he said, “There ain’t no equity anymore.”

Boyden said the real estate bust has also brought in more Realtors who benefited when commissions rose along with home values. Now, their incomes are shrinking along with home values.

Other small businesses, some 20 years old or more, are also seeking his assistance, he said.

Boyden, who is also a trustee for the Bankruptcy Court, said clients complain that no one is buying.

Also, a 30 percent increase in adversarial filings – lenders trying to force borrowers into bankruptcy – indicates banks are keeping wayward clients on a shorter leash, he said.

Boyden said he does not foresee much improvement before 2011 and only slow progress then.