Bringing it Home: Pitkin bankruptcies rose during the recession

Editor’s note: “Bringing It Home” runs weekends in The Aspen Times and focuses on state, national or international issues that have ties to or impacts on the Roaring Fork Valley.

As a bankruptcy attorney for more than 30 years, William T. Phillips said the past five or six years have been his busiest.

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When the real estate bubble burst, leading to the Great Recession, which plagued many pocketbooks, many Roaring Fork Valley residents saw themselves overleveraged, their finances in peril. Foreclosures and receiverships became commonplace in the valley, as did bankruptcy filings. There were eight filings by Pitkin County residents in 2008. But from 2009 to 2013, there were 205 in Pitkin County, equating to an average of 41 filings a year during that period.

“It was my time in the sun,” said Phillips, whose practice is in Glenwood Springs.

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Phillips, however, said he anticipates fewer bankruptcy filings as the economy continues its recovery.

“(Bankruptcy activity is) slowing down, and (property) prices are coming back,” he said.

On Monday, the American Bankruptcy Institute issued its annual report for 2013, in which both individual and personal bankruptcies combined to drop by 13 percent. All told, 1.03 million businesses and individuals filed for bankruptcy last year, compared with 1.19 million in 2012, the institute said.

Bankruptcy filings in Colorado totaled 19,851 in 2013, down from 26,099 in 2012, according to data from the U.S. Bankruptcy Court in the District of Colorado.

Pitkin County saw a sliver of Colorado’s totals, posting 46 bankruptcies in 2013 and 31 in 2012, according to Aspen Times research of filings in the Denver bankruptcy court.

But Phillips and Adam Gillespie, a bankruptcy lawyer in Basalt, said they have noticed that Pitkin County filings have slowed down since last summer.

“In the last six to eight months, it’s gone down,” Gillespie said. “I’m not getting as many calls.”

That’s because real estate prices have begun to climb back in Pitkin County and, in turn, are reversing property owners’ fortunes.

In large part, the bankruptcy filings have been because “people were out of work and had to take lesser jobs or their homes were getting foreclosed on,” Gillespie said. “I saw that the last few years but not so much since about June 2013.”

Foreclosure filings in Pitkin County dropped to 57 in 2013, according to a report by Basalt real estate agent Garret Brandt. The number had surpassed 100 in 2010, 2011 and 2012.

“So many people, for various reasons, used equity in their home as a credit card and used it to leverage themselves for other investments, which at the time seemed like a good idea,” Phillips said. “Then they got caught.”

Phillips noted that the more recent personal bankruptcy cases he’s handled have come from the “formerly wealthy people because they were the ones who could hold out the longest.”

Phillips also said the bulk of bankruptcy filings he handles are not a symptom of poor or irresponsible money management.

“I think there’s a common misperception about bankruptcies,” he said. “Of course there are always going to be deadbeats, but the most part of my clients had some really bad luck. That’s not saying putting all of your eggs in one investment is a good idea, but it might have seemed like it at the time.”

Among the larger business bankruptcies in Pitkin County over the past five years were the Dancing Bear hotel project, Mountain House Lodge and Aspen Legacy, which once owned the Hyman Avenue buildings occupied by Little Annie’s and the former Huntsman Gallery.

rcarroll@aspentimes.com