Bankruptcy in Utah leads the nation

Legislation enacted by Congress in April 2005 will create the biggest changes in Federal bankruptcy law in decades.  The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 will eliminate the opportunity for most Americans with debt problems to file for bankruptcy under the rather forgiving Chapter 7 of the bankruptcy code. Instead, most filers will have to use Chapter 13 of the code, which allows the court to establish a five year repayment plan for a portion of the debt. Proponents of the plan, which included the major credit card companies, blamed the recent increases in bankruptcy filings on irresponsible shoppers, drug users, and gamblers, and not ordinary citizens who have simply hit a streak of bad luck or personal misfortune. Is this really the case? Are most bankruptcy filers just wild, drug-using irresponsible people?

There is certainly some evidence to the contrary, and nothing suggests otherwise like the fact that the highest bankruptcy rate, on a per capita basis, is in Utah? Most would assume that the highest rates of bankruptcy would be in states that have more than their fair share of vices - California, New York, or even Nevada. Shouldn’t the state with a town nicknamed “Sin City” suggest irresponsible activity and bankruptcy? But no, the Bankruptcy Capital of America is none other than Utah.

On the surface, this statistic just doesn’t seem to make sense. Anyone who knows anything about Utah associates it with the hard working, industrious and responsible Mormons, who regularly contribute ten percent of their incomes to their church. How did Utah find itself to be the pinnacle of personal financial disaster?

Utah does have a few attributes that make it unique as a state. Alone, none of these things would raise an eyebrow, but added together, they form a recipe for disaster:

Utah has the highest birthrate in the United States. Seventy percent of those who live in Utah are members of the Church of Jesus Christ of Latter-Day Saints, otherwise known as the Mormons. Members of the church are encouraged to have large families, and they do so. The costs associated with having a large family - food, housing, utilities, clothing and more, are higher than they are for an average sized family.

Utah tends to have fewer families with two wager earners than most states. Because families in Utah are larger than elsewhere, there tend to be more families with stay-at-home moms. With only one wage earner, and larger families, the per capita income is smaller in Utah.

Wages paid to workers in Utah are lower than the national average. Many high tech companies have established facilities in Utah during the last decade, but many of these high tech jobs are actually just telephone customer service positions that pay as little as $8 per hour. It is difficult to raise a family on such a wage, and nearly impossible to raise a large family that way.

Members of the LDS Church are encouraged to tithe ten percent of their income to the Church. Many do so, leaving them with a smaller percentage of their income to use for living expenses.

The ratio of housing costs to wages are higher than in other states, making housing comparatively more expensive. 

As a whole, this combination of large families, lower wages, single earners, and church donations have created an economic environment that makes it difficult for many Utahns to meet all of their financial obligations. This flies in the face of arguments put forth during recent legislative sessions that suggest that bankruptcy is strictly the product of irresponsibility. For many hard working families in Utah, the new federal legislation will make a difficult situation even more so.

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