SALT LAKE CITY -Despite its conservative image, Utah remains the bankruptcy capital of the U.S. and credit union leaders like others in the financial sector are mystified at the cause and how to curb the trend. "We've tightened our own risk-based lending programs," declares James Hofeling, immediate past chairman of the Utah League of Credit Unions, in outlining one step his own CU has taken. The state's top CU regulator, Orla Beth Peck, said the Utah bankruptcy problem seems to hit "every CU in cycles" as individual CUs "take turns" depending on their membership composition and market conditions." Nonetheless, the American Bankruptcy Institute in Washington has identified Utah as holding the dubious distinction of holding the most bankruptcies per household for the last two years. In the period ended Sept. 30, 2002, there was one Utah bankruptcy petition filed for every 38 households with Tennessee coming in second at 40. Exactly why Utah, a state that the Salt Lake Tribune noted "prides itself on its pioneer heritage and work ethic" leads the nation is a puzzle, though Hofeling, president of Jordan Credit Union, Sandy, suggests one reason is the large number of young families in Utah who seem to be willing to take on enormous amounts of debt. Another suggestion has been the strict Mormon practice of 10% tithing which "may not be fully recognized on the lending side" as one CU executive put it. As a Mormon, he asked not to be identified. Steven Christensen, chairman of the League and president of Tooele Federal Credit Union, said throughout the country and in Utah "there is certainly less stigma associated with bankruptcy." He said another factor has been tight loan competition and the trend among financial institutions to offer 100% financing on both vehicles and home equity. Tooele has now reduced home equity financing to 80%, he said. Christensen said it has now become paramount that Congress act on bankruptcy reform. "Financial institutions need to pull together on this," said Christensen. Hofeling, the outgoing League head, said his own CU has seen its charge-offs climb this year to 1.2% well above the national average of .8%. Peck, the Utah CU regulator and director of the credit union division of the Department of Financial Institutions, said Hofeling's CU, with a heavy concentration of education employees, is one of the Utah CUs in the "my turn cycle." Christensen of Tooele said his CU has been at a .6% charge-off ratio adding local unemployment factors "and large families" in Utah figure into the mix. His community has been experiencing a 9% unemployment rate. Hofeling lamented there is not more cooperation among financial institutions since banks "are certainly facing the same conditions. But any hint of cooperation on the problem has been dashed by the recent bitter tax fight in the legislature which left the two industries barely talking to each other. Peck said there are hopeful signs including more financial literacy education programs under way in the state including those conducted by Jumpstart, a Washington group. "I think we do need to push education of young people on how to manage their personal affairs," said Peck, who is a member of Jumpstart's Utah chapter. She said the chapter recently held a "Teachers Summit" in Thanksgiving Point April 11 at which 130 attended. "That was a pretty nice turnout," said Peck. Meanwhile, the American Bankruptcy Institute published Utah data earlier this month noting that the U.S. Bankruptcy Court here received 5,539 bankruptcy petitions in the first three months of the year, a 6.4% jump from the same period a year ago. The overwhelming majority-66% – filed for Chapter 7 with the remaining 34% filing for Chapter 13. In discussing the data, Hofeling noted that the "thing that jumped out on me" is that there seems to be a lot of young couples who file for bankruptcy after they have overextended their finances trying to immediately achieve the same standard of living that their parents enjoyed." But they don't realize, he said "it took their parents years to get where they are," said Hofeling. [email protected]