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Bankruptcy petitions show NM property rich, cash poor

The Dennis Chavez Federal Building and United States Courthouse also houses the bankruptcy court. (Greg Sorber/Albuquerque Journal)

The Dennis Chavez Federal Building and United States Courthouse also houses the bankruptcy court. (Greg Sorber/Albuquerque Journal)

ALBUQUERQUE, N.M. — The description of New Mexico as a state where many families are property rich but cash poor gets some legs in a federal study of bankruptcy filings in 2013.

The average consumer bankruptcy petition listed assets worth $109,012 in real and personal property last year, highest among the six states in the 10th judicial circuit – Colorado, Kansas, Oklahoma, Utah and Wyoming are the others – according to a July report from the Administrative Office of the U.S. Courts.

New Mexico’s average of $109,012 is 8.5 percent lower than the national average of $119,097 in assets. The average for the entire 10th circuit was much lower at $89,624 in assets.

Although the report does not have formal rankings, New Mexico appears to rank about in the middle of the 90 district bankruptcy courts serving the 50 states and District of Columbia in terms of average assets. The 90 courts are grouped into 11 circuits.

“Homeownership is extremely important to New Mexicans. It kind of goes along with the importance of family,” said Albuquerque bankruptcy lawyer Shay Meagle.

“Some people will incur whatever debt they have to incur or do whatever they believe they need to do in order to keep their home, even if the debt secured by the home greatly exceeds the value. I believe that this is somewhat unique, in its extent, to our area.”

New Mexico’s comparatively high average asset value surprised Albuquerque bankruptcy lawyer Ron Holmes.

“But in all fairness, the numbers are the total value of assets, not the value of equity,” he said. “Most debtors have very little equity or no equity because they are upside down in their properties.”

map templateCash poor, too

While the federal report affirms that many financially insolvent New Mexico families are relatively property rich, it also appears to affirm that those same New Mexico families are relatively cash poor.

The median monthly income listed on consumer bankruptcy petitions filed in the state last year was $2,466, which ranked New Mexico 62 out of the 90 district bankruptcy courts. The median monthly income nationwide was $2,772, while the median for the 10th circuit was $2,625.

“Cash poor is a chronic problem in New Mexico,” Holmes said.

Meagle said she thought New Mexico’s median monthly income of $2,466 seemed high from her experience, even though it was in the bottom quartile for median incomes nationwide. She speculated that it might reflect proportionately more families filing for bankruptcy in New Mexico than individuals.

On the other side of the ledger, the median monthly expenses listed on consumer bankruptcy petitions filed in the state was $2,793, which ranked New Mexico 20 out of the 90 district bankruptcy courts for having the highest expenses.

Median monthly expenses nationwide were $2,674, while the median for the 10th circuit was $2,694.

The more than $300 a month differential between median monthly income and median monthly expenses in New Mexico is among the biggest income/expense gaps among the 90 district bankruptcy courts.

“I am not surprised by the high expenses or by the serious gap between income and expense numbers,” Meagle said.

Incomes have lagged the cost of living in New Mexico, particularly in the Albuquerque and Santa Fe metro areas, for a very long time, she said.

‘Paying a heavy price’

Meagle noted bankruptcy filers in New Mexico had 40 percent more debt secured by liens than the average filer in the 10th judicial circuit.

“That is why I use the term ‘property rich’ loosely because New Mexicans are paying a heavy price to own the property they have,” she said. “They have a very high amount of liens on their assets, comparably, than filers in other jurisdictions.”

Consumers who end up in Bankruptcy Court in New Mexico appear to have borrowed money not only to buy their houses, but also the appliances in their houses, as well as their cars or trucks and televisions. As a result, all those belongings could be subject to repossession.

“They have nothing else to leverage. Nothing to offer as collateral. Everything they own is being threatened,” she said. “If you will notice, this is not the situation in the vast majority of other districts and in no other district in the 10th circuit.”

In line with the national average, 70 percent of the assets in an average consumer bankruptcy in New Mexico in 2013 were real property, which is basically real estate like a house on a lot.

The average assets listed in bankruptcy petitions nationwide get pumped up by data from courts on the East and West coasts. For example, California’s central district (Greater Los Angeles and the San Fernando Valley) averaged $177,910 in assets, while Connecticut averaged $164,162.

The court district with the highest average asset value at $5.8 million serves the District of Columbia. D.C.’s average asset value is an unbelievably high number that’s likely skewed by one or possibly two big crash-and-burn consumer bankruptcies.

The court district with the lowest average asset value serves western Tennessee (Memphis and Jackson), at $46,602. The 6th circuit in general – Kentucky, Michigan, Ohio and Tennessee – had the lowest average of $70,626 in assets among all judicial circuits in the country.