Index: Economy / Subcategory: Individual

Bankruptcy and Foreclosure

Date updated: 04/23/2013

Bankruptcies and foreclosures are legal procedures that are generally invoked when an individual's level of debt becomes unmanageable. As such, they can be a marker for high levels of personal debt. Major changes in bankruptcy law passed by Congress in 2004 went into effect in late 2005. The American Bankruptcy Institute provides information [pdf] on these changes to personal bankruptcy law.

Foreclosure is a legal procedure that involves mortgaged properties. If a homeowner defaults on his or her mortgage, by either failing to make mortgage payments or failing to follow other terms of the mortgage document, foreclosure may be the result. The homeowner relinquishes all rights to the property, and the mortgage lender takes possession of the property. Usually there is a forced sale of the property at public auction; the proceeds of this sale are applied to the mortgage debt.

Bankruptcy is a legal procedure that begins when an individual has more debt than assets. Title 11 of the Federal Bankruptcy Code lists four bankruptcy filings that apply to individuals.

What this chart shows: Foreclosure Filings in Larimer County, 2003 - 2012

*New filings only

Data Source: Trustee Office of Larimer County (data not available online)

See data table

What the above data tell us:

From 2003 to the peak of foreclosure filings in 2009, the number of foreclosure filings in Larimer County increased 226%. The biggest year-to-year increase in the number of filings occurred between 2008 and 2009. There were 450 more foreclosure filings in 2009 than in 2008, an increase of 28.4%. The large increases in foreclosures that took place prior to 2009 were likely due to sub-prime mortgages.

There were 992 fewer foreclosure filings in 2012 than 2009, a 49% decrease. It's doubtful this is caused by an improving economy, but is more likely due to a tightening of credit by banks and self-imposed belt tightening by consumers.

What this chart shows: Foreclosure Filing Rate (per 1,000 Homeowners) in Larimer County, 2003 - 2012

Data Sources:

See data table

What the above data tell us:

From 2003 to the peak in 2009, the Larimer County foreclosure filing rate increased 177% (from 6.5 filings to 18.0 filings per 1,000 homeowners). The largest year-to-year increase in foreclosure filing rate occurred between 2008 and 2009. During that period, the rate of foreclosure filings increased by 3.8 filings per 1,000 people. Financial and real estate industry professionals have attributed much of this increase to a sluggish economy, manufacturing/tech sector job losses, and an increase in mortgage lending, particularly in subprime loans.

Since 2009, the foreclosure rate has declined 49%, from 18.0 in 2009 to 9.2 in 2012. It's doubtful this is caused by an improving economy, but is more likely due to a tightening of credit by banks and self-imposed belt tightening by consumers.

What this chart shows: Personal Bankruptcies in Larimer County, 2003 - 2012

*Bankruptcy filings are for fiscal years, October 1 through September 30.

Data Source: Administrative Office of United States Courts (data not available online)

See data table

What the above data tell us:

There were 849 more bankruptcy filings in 2005 than in 2003. This represents a 62% increase in the number of filings. The largest year-to-year increase occurred between 2004 and 2005, when the number of filings increased by 653 or 41.9%. Although the number of bankruptcies decreased by 72% in 2006 when stricter bankruptcy laws took effect, they have been steadily increasing once again as more individuals qualify for bankruptcy due to the poor economy.

Major changes in bankruptcy law passed by Congress in 2004 went into effect in late 2005. Financial industry professionals attribute the rapid increase in personal bankruptcy to knowledge of the impending changes. However, that does not account for the preceding four year trend in which the rate increased each year. Other contributing factors include a sluggish economy, job losses, and a high national level of consumer debt. The American Bankruptcy Institute shows a correlation [pdf] between the amount of consumer debt and bankruptcy filing rates.

In addition, a Harvard University study, MarketWatch: Illness And Injury As Contributors To Bankruptcy, found that a large number of filers cited medical causes for their financial problems. Most filers, who cited medical causes as their reason for filing, owned their home, were middle or working class, and had health coverage at the time of filing.

What this chart shows: Personal Bankruptcy Filing Rate (per 1,000 Adult Population) in Larimer County, 2003 - 2012

*Bankruptcy filings are for fiscal years, October 1 through September 30.

Data Sources: Administrative Office of United States Courts (data not available online)

See data table

What the above data tell us:

Between 2006 and 2011, bankruptcy rates increased 155% in Larimer County before dropping 36% in 2012. Beginning in 2008, the rate in Larimer County has been lower than in the state. (See data table for Colorado rates.)

Major changes in bankruptcy law passed by Congress in 2004 went into effect in late 2005. Financial industry professionals attribute the rapid increase in personal bankruptcy to knowledge of the impending changes. However, that does not account for the preceding four year trend in which the rate increased each year. Other contributing factors include a sluggish economy, job losses, and a high national level of consumer debt. The American Bankruptcy Institute shows a correlation [pdf] between the amount of consumer debt and bankruptcy filing rates.

In addition, a Harvard University study, MarketWatch: Illness And Injury As Contributors To Bankruptcy, found that a large number of filers cited medical causes for their financial problems. Most filers, who cited medical causes as their reason for filing, owned their home, were middle or working class, and had health coverage at the time of filing.

Additional Information:


Related Information on COMPASS -

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Industry Standards or Targets:

N/A

Data Tables:

Foreclosure Filings* in Larimer County

Year

Foreclosures

Larimer County Home-owners

Foreclosure Rate

2003

625

96,371

6.5

2004

780

100,212

7.8

2005

939

104,347

9.0

2006

1,253

108,208

11.6

2007

1,577

110,112

14.3

2008

1,587

111,695

14.2

2009

2,037

113,179

18.0

2010

1,762

113,267

15.6

2011

1,258

114,649

11.0

2012

1,045

114,173

9.2

*New filings only

See chart - Foreclosure Filings

See chart - Foreclosure Filing Rate

Personal Bankruptcy Filings in Larimer County & Colorado

Year

Larimer Bankruptcies

Larimer Population (Age 18+)

Colorado Bankruptcies

Colorado Population (Age 18+)

Larimer Rate

Colorado Rate

2003

1,362 206,350 25,404 3,410,632 6.6 7.4

2004

1,558 211,040 27,383 3,457,311 7.4 7.9

2005

2,211 213,867 42,173 3,503,135 10.3 12.0

2006

630 218,604 9,544 3,569,324 2.9 2.7

2007

951 223,668 14,854 3,628,969 4.3 4.1

2008

1,192 228,751 20,171 3,695,673 5.2 5.5

2009

1,435 233,453 25,278 3,760,623 6.1 6.7

2010

1,742 236,471 31,160 3,822,317 7.4 8.2

2011

1,787 240,698 31,307 3,884,544 7.4 8.1

2012

1,155 244,600 22,014 3,945,262 4.7 5.6

See chart - Personal Bankruptcy Filings

See chart - Personal Bankruptcy Filing Rate