Bankruptcy filings continue to fall in NM

ALBUQUERQUE, N.M. (AP) - Bankruptcy filings in New Mexico have been sliding since mid-2010 and continued to decrease during the first half of 2012.

The Albuquerque Journal reports that the clerk's office for the U.S. Bankruptcy Court in Albuquerque says petitions were filed for 2,538 bankruptcies, down 18 percent from 3,094 filed during the first half of 2011.

The Alexandria, Va.-based American Bankruptcy Institute says New Mexico's per capita rate of 2.5 bankruptcies per 1,000 residents was 15th lowest in the country during the first half of this year. The state also had the 15th lowest rate for all of 2011.

The national per capita bankruptcy rate was 4.1 filings per 1,000 residents during the first half of the year.

Weak consumer spending was identified as one reason for the drop in bankruptcy filings across the country — the rationale being that fewer consumers are spending themselves into financial insolvency.

The most common explanation for New Mexico's low bankruptcy rate is the state's high poverty level.

"Bankruptcy doesn't help people who don't have anything," said Albuquerque bankruptcy lawyer Bill Davis. "Bankruptcies are to protect assets. When it gets to the point where people don't have assets to protect, technically they don't need to file bankruptcy."

In 2010, more than 20 percent of the state's population lived in poverty — the official poverty level was an annual income of $22,314 for a family of four, according to the Census Bureau. A more recent report by the Corporation for Enterprise Development found that just short of half of all households in the state lack the savings to pay bills for three months if something bad happens.

Being poor doesn't stop debt collectors or prevent them from getting a court order to "garnish" wages, which means that the court gives debt collectors the authority to deduct money from a consumer's paycheck to pay a debt.

Many New Mexicans are so poor, taking home $290 or less a week in pay, that a court order to garnish wages is unenforceable, said Michael J. Caplan, a bankruptcy lawyer in Grants. Consumers with that low of an income are typically called "judgment proof."

"They're still getting the phone calls (from debt collectors)," Caplan said. "They choose to ride it out."

Caplan and Davis said they turn away potential bankruptcy clients who don't meet the $290 threshold to justify a filing.

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Information from: Albuquerque Journal