Credit card debt, medical bills and poor money management appear to be combining with the economic downturn in causing more bankruptcies in the Tri-Cities, officials say.
In 2008, there were 1,122 Chapter 7 and Chapter 13 bankruptcies filed in the Tri-Cities. That was up nearly 40 percent from the 804 filed in 2007, according to the U.S. Bankruptcy Court in Spokane.
The biggest jumps happened in the last quarter of 2008, according to court records.
There were 311 bankruptcies filed in the last three months of the year, compared with 174 in the final three months of 2007. That was nearly a 79 percent increase.
And in January, 92 bankruptcies were filed, compared with 71 the prior January.
Bill Hames, a bankruptcy lawyer in Kennewick who handles mostly commercial cases but also does some individual bankruptcies, said his business is up 30 percent to 40 percent since fall.
"It started probably in October," he said. "Particularly in the construction business, people are really really slow."
It also has hit restaurants, he said.
Hames explained that Chapter 13 bankruptcies are for individuals or sole proprietor businesses who, after paying living expenses and sometimes secured debts such as mortgages and car loans, can contribute to a payment plan to repay at least some of the unsecured debt.
Chapter 7 bankruptcies, "the average, ordinary bankruptcy," Hames said, are filed when the debtor can't pay unsecured debts such as credit card bills -- and sometimes secured debt -- and debts are wiped clean.
Many of his local clients are filing Chapter 7 bankruptcies, and that often is the best option for a small business that can't reorganize to repay debt, Hames said.
Bankruptcy filings haven't increased to where they were before the law changed in 2004, "but they're coming back strong," he said.
Tri-City bankruptcy figures for years prior to 2007 were not available from the court.
Credit card bills and other unsecured debt seems to be bringing more clients into Pasco lawyer Heidi Ellerd's office.
"They've increased a lot the last few months," Ellerd said. "I used to do one a month and now I do three to five a month."
Medical bills also are a big reason she sees for people getting into financial trouble.
At Consumer Credit Counseling Service in Kennewick, fewer people came in for prebankruptcy counseling in January compared with last year, said Laurie Tufford, chief executive director.
She said there were 74 counseling sessions last month, compared with 108 in January 2008.
Tufford equated the decrease to lawyers sending clients online or elsewhere to get financial counseling.
When clients come in for prebankruptcy counseling, which is requisite before filing bankruptcy, they talk about what caused them to get into financial difficulty, Tufford said. Other topics include credit scores, bankruptcy alternatives and a budget analysis.
"We go over different types of bankruptcies, we talk about what consequences are going to come from bankruptcies," she said.
Tufford said it's an important opportunity to educate people about money management, particularly because the primary reason people file for bankruptcy is poor money management. Second to that is reduced income from layoffs and reduced hours, she said.