Reference - Utah, the Nation's
Bankruptcy Capital
Congress recently passed the Bankruptcy Abuse Prevention and Consumer
Protection Act, designed to minimize frivolous bankruptcy filings and to
require debtors to repay some of their debt. Once it takes effect in
October, 2005, the law will make it harder for those with problem debt
to have their debt wiped away by the courts. Most will have to agree to
a five-year repayment plan. In passing this new law, members of Congress
suggested that our bankruptcy courts are filled with cases involving not
ordinary citizens, but with reckless gamblers, shoppers, and drug
abusers. Is that really the case?
One would think, given the accusations, that the highest bankruptcy
rate in the Untied States would be in place where such vices were
common, such as California, New York or even Nevada. If problem gambling
is thought to be the cause of so much bankruptcy, then one might assume
that Las Vegas would be the bankruptcy capital of the world. How odd it
is, then, to discover that Utah, one of only two states that prohibits
gambling completely, has the highest per capita incidence of bankruptcy
filings in the United States. Utah? How can that be?
Utah has a number of aspects that, taken on their own, don’t suggest
that bankruptcy would be a problem. Added together, however, these
things create a recipe for disaster:
Utah has the nation’s highest birthrate. Seventy percent of the
citizens of Utah are members of the Church of Jesus Christ of Latter-Day
Saints, and members are encouraged to have large families. It costs more
to feed, clothe and house a large family than a small one.
Utah has more families with only one wager earner. Large families
mean more stay-at-home moms, so a lot of families must get by on a
single paycheck.
Utah’s wages are lower than average. Many high tech companies have
relocated to Utah in recent years, but the “high tech” jobs they provide
are often telephone customer service jobs, which typically pay $8-10 per
hour.
Members of the LDS Church are expected to tithe 10% of their income
to the Church.
While Utah’s home prices are not among the highest nationally, they
are fairly high when compared to the average wage within the state.
The combination of large families, fewer workers per family, church
donations and low wages have contributed to an economic environment that
makes it very hard for many Utahns to stay afloat financially. This is
in direct contrast with the arguments put forth by Congress when the new
bankruptcy law was proposed, which suggested that most people filing for
bankruptcy are simply irresponsible. For many hard-working people in
Utah, the new law will make it harder than ever to make ends meet.
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