After a huge run-up that began four years ago, the number of bankruptcy filings in Las Vegas dropped sharply last year.
The 19,797 cases that were launched in 2011 marked a 18.4 percent decline from the year earlier as the three major categories, Chapter 13 repayment plans for individuals, Chapter 11 reorganizations for companies and individuals with large debts and Chapter 7 liquidations all came down.
However, bankruptcy lawyers aren't ready to go on vacation.
"I think it is just a temporary lull," attorney Anthony Deluca said. "The banks really started catching a lot of flack about their foreclosure practices, so they pulled back and are trying to get all their ducks in a row."
Added attorney Richard Newark, "Why file now when you can live in your house a while for free?"
But among personal bankruptcy filings, a sharp dichotomy has emerged. Chapter 13s have plunged 39 percent from the peak year of 2009, but Chapter 7s fell only 12 percent.
Because many people try Chapter 13 to shed debt to save their homes, Newark said those filings are directly tied to the falloff in foreclosures. A Chapter 7 wipes almost all debt clean but permits people to keep only limited property.
Some attorneys, however, see the trend of people essentially throwing in the towel.
"What has happened is that housing values have gone down so far that it just doesn't make sense to keep paying the mortgages any more," attorney Seth Ballstaedt said. "People are just deciding to give up and perhaps buy another house a couple of years later" when their credit scores are better.
If a house is worth less than the first mortgage, a second mortgage can be erased in a Chapter 13, a technique called lien stripping. But if a house is worth only a fraction of the first mortgage, which cannot be rewritten unless the lender consents, owners may opt to rent elsewhere.
"If you are way underwater, a 13 just doesn't do any good, and loan modifications are a joke," Deluca said.
On the corporate side, the demand to restructure overwhelming debt remains strong.
"Business is up, revenues are up, unemployment is down a bit, but companies are still stressed and liquidity is still stressed," said Gerald Gordon, whose firm, Gordon Silver, has clients including the Las Vegas Monorail, Ahern Rentals and Hooters Hotel in Chapter 11.
Moreover, many loans that matured and were extended during the pit of the recession will come due again in a year or two, he said. The economy has not yet rebounded enough to bail out companies that were in trouble.
"I hope it slows down, but I think it is still going to be busy," attorney Bob Olson said.
Contact reporter Tim O'Reiley at firstname.lastname@example.org or 702-387-5290.