Pitkin County foreclosures, bankruptcies plummeted in 2014

Rick Carroll
The Aspen Times

On the mend

A recovering economy meant bankruptcy and foreclosure filings in Pitkin County in 2014 were their lowest since 2008. Here’s a look at how the yearly filings compared from 2008 to 2014.

Year Bankruptcies Foreclosures

2008 8 35

2009 26 105

2010 41 144

2011 60 113

2012 31 113

2013 46 57

2014 16 28

SOURCE: U.S. Bankruptcy Court, District of Colorado, and Pitkin County Treasurer’s Office

When Pitkin County’s economy was thriving before the Great Recession hit, spec-home builders wanted some of the action. That was the case for a limited liability corporation that bought an Old Snowmass property in 1993 and finished building a 6,200-square-foot home on its 43 acres in 2002.

Flying W Snowmass LLC hoped to sell the property in 2002, but a series of problems with its loan transactions didn’t allow it to go on the market until 2008. By then, it was too late.

“Unfortunately, in 2008, the real estate market in Snowmass as well as virtually all of the United States had deteriorated markedly,” said a Dec. 17-dated status report for the LLC’s Chapter 11 bankruptcy, which is on file in U.S. Bankruptcy Court in Denver.

Flying W Snowmass sought bankruptcy protection in November — its filing said it owes to mortgage lenders a combined $3.46 million — which allowed it to stave off foreclosure proceedings in Pitkin County.

Foreclosure actions taken by banks, followed by bankruptcy proceedings initiated by homeowners, have gone hand in hand over the years in Pitkin County, but an Aspen Times review of data indicates a reversal of the trend.

There were 16 bankruptcy filings by Pitkin County residents and businesses in Denver’s bankruptcy court system in 2014, the lowest total since 2008, when there were eight. From 2009 to 2013, there were 205 bankruptcies filings in Denver with Pitkin County addresses, equating to an annual average of 41 filings during that period.

Foreclosures followed suit, with Pitkin County seeing 28 proceedings in 2014. From 2009 to 2013, there were 532 foreclosure proceedings. That’s an average of just more than 106 a year.

John LaSalle, an attorney with offices in Aspen and Basalt, spotted the consumer-debt trend when the real estate bubble burst, and in 2009, “I turned myself into a bankruptcy lawyer,” he said.

Real estate and business were the focus of his practice, but with bankruptcies on the rise, he became well-versed in that area of law, he said.

“I really think most of the bankruptcies were driven between 2009 and 2014 by people being in trouble with their homes, not being able to afford their mortgages and also running up tremendous credit card debt,” he said.

Bankruptcy filings would allow homeowners to hold onto their real estate so long as they paid off their credit-card debts, LaSalle said.

LaSalle made his bankruptcy clients aware of government offerings such as the Home Affordable Refinance Program and the Home Affordable Modification Program.

“In most cases, if their home was under water, you could reduce the principal” through those programs, he said.

But does the plummet in bankruptcy and foreclosure filings, combined with a Pitkin County real estate market that saw some $1.5 billion in total transactions in 2014, mean there’s another bubble that’s about to burst?

“I don’t think so,” LaSalle said. “I think what’s happened is that this period of time has shaken out most of the people who maybe got mortgages that were bigger than they could handle. There were an awful lot of my clients who had a second mortgage and were using their homes as a piggy bank.”

And the return of spec builders in the Roaring Fork Valley — the recession put them on hiatus — bodes well, said broker Steven Shane, of Aspen-based Steven Shane Real Estate.

“I’m feeling optimistic,” Shane said. “No. 1, a lot of developers who have jumped back into the game can now bring new products to the table in 2015. And as prices continue to increase in Aspen, there’s going to be a ripple effect in Snowmass, and we’re going to enjoy the benefits of a rigorous economy.”

In January, Glenwood Springs bankruptcy attorney William T. Phillips told the Times that he expected filings to go down as the real estate market began to recover.

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