4,621 bankruptcies filed in Wichita in 2009

More people and businesses filed bankruptcy in Wichita last year, another sign of growing economic distress.

An average of nearly 400 people and companies a month — 4,621 total — filed in 2009. That's up about 25 percent from 2008.

This includes all bankruptcies filed at the U.S. Bankruptcy Court in Wichita, which includes a large number of people and businesses from outside Sedgwick County.

The increase echoes an even larger rise nationally. A recent analysis by the Associated Press found a 32 percent increase across the U.S. and a 26 percent rise in Kansas.

The main difference between 2008 and 2009, say experts, is obvious: the recession.

Local bankruptcy attorney Bill Zimmerman said he saw a lot of high-earning production workers earlier in the year, soon after mass aviation layoffs were announced.

But, he said, that's no longer the case. Now, he's seeing a lot of small-business owners, especially building contractors, and professionals.

Nobody's gaming the system, Zimmerman said. The people he sees are shocked and humiliated.

"I hear it over and over again: 'I don't want to be here, I don't want to do this,' " he said. "They are so far removed from the public perception that those who file bankruptcy are high-living deadbeats that it's just stunning."

Their problem, he said, is that they bought things a couple years ago that were reasonable for their income — maybe a large home or an SUV for their business.

But that income dried up last year and they depleted their savings, borrowed on their life insurance policies, even spent their retirement funds. And the economy makes it tough to sell an expensive home or car for a less-expensive one.

"Who wants to buy a half-million-dollar home now? And could they even get a new mortgage with credit being what it is?" Zimmerman said.

The number of bankruptcies tend to follow the economy and, especially, employment, said Jeremy Hill, director of Wichita State University's Center for Economic Development and Business Research.

There is a lag between the financial shock, such as a layoff or the drying up of business, and the bankruptcy.

Unemployment benefits and savings can help stave off bankruptcy, or merely delay it, depending on the amount of debt.

The inescapable conclusion, Hill said, is that bankruptcy in Wichita will remain at a high level as the recession lingers and more people exhaust their benefits and savings.

"2010 is going to be a tough year," Hill said.

There also will be an economic impact on the general economy because those people can't spend much, Hill said.

And those who can, who are employed and have a reasonable debt load, will continue to pay down debt because they remain worried. That doesn't help retailers, restaurants and other local businesses, either, he said.

In 2009, Americans saved at the highest rate in 10 years, according to the Bureau of Economic Analysis, putting aside nearly 5 percent of their income.

The number of bankruptcies in 2009, however, remains far below the level before national reform in 2005.

That reform made it a requirement to get credit counseling, work out a payment plan and not receive a Chapter 7 liquidation if the applicant didn't meet income requirements.

More than 11,000 people filed bankruptcy in 2005 and 3,100 in 2006.