Bankruptcy Filings Down 9 1/2 Percent in Wisconsin

Oct. 21 (Source: By Paul Gores, Milwaukee Journal Sentinel) - The pace of bankruptcy filings in Wisconsin has slowed this year — a welcome trend, but one that attorneys who deal with insolvent consumers and business people said won’t improve significantly until joblessness wanes.

Through the first nine months of 2011, federal bankruptcy filings were down 9.5% from the same time last year, to 21,167, U.S. Bankruptcy Court records show.

Most of those filings were for Chapter 7 bankruptcy, the type that wipes out debt such as credit card balances, utility bills and medical bills.

The state figures track closely with consumer bankruptcy filings nationally. Through the first three quarters in the United States, consumer filings decreased about 10%, to a little more than 1 million, the American Bankruptcy Institute reported.

Economist Jay Mueller said it makes sense that bankruptcies would start to decrease now because they lag the worst stress in the general economy, which occurred a couple of years ago.
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“I don’t think there is a lot to read into it other than to say there is a lag effect between a bad economy and bankruptcy filings,” Mueller, a portfolio manager for Wells Fargo Advantage Funds in Menomonee Falls, said of this year’s decrease.

Milwaukee bankruptcy attorney Robert Waud said he’s still seeing many people who have run their own business finally choose to throw in the towel. They often file for personal Chapter 7 bankruptcy.
“I’m busy. I’m seeing the same types of problems — the small-business person who doesn’t have any customers, and just a lot of people who are out of work,” said Waud, of Todd C. Esser & Associates.
Among recent bankruptcy filers at his office: cabinet makers for high-end homes and a repairer of hydraulics.

“Basically, what he did all his life was repair hydraulics on off-road machines for construction companies, and they just are not coming in the door,” Waud said.

Madison bankruptcy attorney Claire Ann Resop, of von Briesen & Roper, said she is seeing a lot of people who own small businesses that cater to minor luxuries instead of necessities, such as boutique clothing, furniture and flowers.

“I think the volume of business just doesn’t exist anymore,” she said.

Resop said the stigma of declaring bankruptcy seems to have lessened because in such a slow economy, so many have done it.

“I think the most stark change is businesspeople — higher-income people who were builders, developers, had their own business,” Resop said. “Because a lot of their acquaintances in the business, all of their professional friends, have also had to do it. They’re all in the same place. So I think they kind of look at each other and go, ‘Yeah, it’s the economy. It’s tough.’

Said Waud: “We’ve got to get people back to work before we can solve some of these problems.”

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Harrisburg Files For Bankruptcy Protection

(Wall Street Journal)
NEW YORK—After months of contentious debate among city and state officials, Harrisburg, Pa., filed for municipal bankruptcy protection, days before the state Senate was scheduled to vote on taking over the struggling capital city's finances.

The city, which faces $300 million in debt over a failed trash incinerator project, filed the paperwork in U.S. Bankruptcy Court for the Middle District of Pennsylvania, in Harrisburg. A faxed filing late Tuesday wasn't valid, according to Terry Miller, clerk of the bankruptcy court.

The overnight fax had first been reported by Bloomberg News.

Robert Philbin, a spokesman for Mayor Linda Thompson, who had opposed such a filing, said the mayor thinks the move is unfortunate and that it will complicate matters and add to expenses for the city. Mr. Philbin said the mayor would have preferred the council come to her with an alternative plan, and pointed to a recent poll of registered Harrisburg voters showing only 13% supported a bankruptcy filing.

On Aug. 31, the city council had rejected Ms. Thompson's financial recovery plan, which opened the door for Pennsylvania Gov. Tom Corbett to make good on his threat to take over the state capital's finances.

The plan called for an 8% property tax increase and the outsourcing of some city services, but didn't seek to raise revenue with a 1% sales tax surcharge or a tax on commuters, as some city officials had suggested. The mayor had also backed the state's previous proposals to sell the incinerator, as well as the city's parking-garage system.

Mr. Corbett had pledged state funding to the city if it adopted the recovery plan and warned the state wouldn't bail out the city if it rejected the proposal.

Pennsylvania's General Assembly has passed legislation that would allow it to establish a state-run panel to operate Harrisburg, or other cities that reject recovery plans, under Act 47 for aid to distressed municipalities. The state Senate is due to take up the legislation when it reconvenes next week.
City Councilman Brad Koplinski has long advocated for a bankruptcy filing and voted in favor of the filing on Tuesday to give Harrisburg court-ordered protection from its creditors while it seeks solutions to its financial crisis. The filing was made under Chapter 9, the municipal market's equivalent of Chapter 11.

But opponents believed such a filing would likely impose significant losses on bondholders, which could have ripple effects on the state's credit rating and the broader municipal-bond market.
In addition to Mr. Koplinski, council members Susan Brown-Wilson, Wanda Williams and Eugenia Smith voted in favor of the filing, while Kelly Summerford and Patty Kim joined Gloria Martin-Roberts in opposing the action.

Harrisburg is projected to run out of cash to pay bills and cover payroll costs by the fourth quarter.
The filing had little effect on the municipal bond market Wednesday because the city's troubles had been brewing for a long time and because local-government defaults remain rare.

"This has been one of the slowest-moving train wrecks in my memory," so it isn't likely to affect the market, said Christopher Ryon, a portfolio manager at Thornburg Investment Management in Santa Fe, N.M. "For the calendar year, if you include about $500 million in Harrisburg's liability, that would be $1.6 billion of defaults, which is still very low."

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Posted in bankruptcy filings , bankruptcy protection , Chapter 11 Bankruptcy , harrisburg bankruptcy , Municipal Bankruptcy , US Bankruptcy Court

More College Graduates Filing For Bankruptcy

A wedding ring, college degree and a well-paying job: the American dream or a recipe for bankruptcy?

Some of the factors often associated with financial success are increasingly becoming correlated with personal bankruptcy filings, a study released Tuesday by the Institute for Financial Literacy found.

The study found that from 2006 to 2010, bankruptcy filings increased among college graduates and those earning $60,000 a year or more. What’s more, last year, 64% of bankruptcy filers surveyed were married—a number that also increased from five years ago.

“The Great Recession has had a dramatic impact on the bankruptcy filings of American consumers across the economic spectrum—including college educated, high income earners,” said Leslie E. Linfield, executive director the institute. “While less educated, low income individuals continue to represent the typical bankruptcy filer, this report underscores sophisticated evolution of the profile of the American debtor that now extends to disparate age, income and ethnic groups.”

The survey collected responses from some 50,000 of individuals that filed for bankruptcy in the past five years. All respondents had sought credit counseling.

The study found that those holding a bachelor’s degree accounted for 13.58% of filings last year, up from 11.2% in 2006—a 21% increase. Those holding high school degrees still accounted for the largest percentage of filers, 36.27%, but their proportion of all filers fell by 8.6%.

Those most at risk for a bankruptcy filing were individuals who attended college but did not complete a degree, the study said. They accounted for 28.7% of filings last year.

“This we suspect is because they have all the burdens of school related debt and none of the rewards of an actual degree,” the study said.

While those earning less than $20,000 per year accounted for nearly 40% of all filings, higher-income earners saw their ranks grow in the past five years, the study found.

Those earning $60,000 or more accounted for 9.2% of all filings last years, up from 5.5% in 2006, a 67% increase.

The study found that the number of filers who were married jumped above 60% in the past five years, from 57.2% in 2006. That out paces the 50.3% of U.S. adults that are married, according to the Census.

Based in Maine, the Institute for Financial Literacy is a nonprofit organization that promotes effective financial education and counseling.

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Number of Small Business Bankruptcies Declined in 2011

A recent study by Equifax finds that the number of small businesses that have filed for protection under bankruptcy law has dropped by 15.32 percent from the first quarter of 2010 to the first quarter of 2011.

While the drop in bankruptcy filings over the past year is good news for small business owners, the study also found that the total number of small business bankruptcies in the first quarter of this year are 30.03 percent higher than the number of filings in the first quarter of 2008, prior to the recession.

"In light of today's shifting economic conditions, bankruptcy trends serve as a valuable prism through which to evaluate the credit health of today's small business market," said Dr. Reza Barazesh, senior vice president of Equifax Commercial Information Solutions. "Our latest analysis shows that while business failures may be on the decline, conflicting trends are still making us question if the worst is behind us."

Small businesses in search of the appropriate law for which to file their bankruptcy under can typically choose from Chapter 7, or straight bankruptcy, which involves liquidation of non-exempt assets, and Chapter 11, or the reorganization plan, which allows the company to stay operational while a payment plan is formulated.

Small business bankruptcies declined in past year

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Bankruptcy Filings Down 8 Percent in 2011

ATLANTA - An 8 percent decline this year in bankruptcy petitions nationwide might appear to be a positive economic sign, especially for a country rocked by stock market volatility, a credit downgrade, and continued labor and housing woes.

 

Some industry experts, however, warn that optimism is not in order. The number of bankruptcies may be down, they say, because people cannot afford to file and because there is little pressure from creditors to do so.

The result may be a mass of looming bankruptcy cases, not unlike the shadow foreclosures feared in the real estate business. If the economy does not take a sharp turn for the better, those who have been teetering on the brink of bankruptcy eventually will be forced to file. What the impact of a large number of bankruptcies would be is unclear.

Jack Williams, a Georgia State University law professor who specializes in bankruptcy, said there is no indication that the number of bankruptcies is down as a result of people being better off.

“The economy hasn’t turned,’’ he said, “and, if anything, it may be going back down.’’

In the future, he added, “we’ll see a lot more people who have weathered the storm so far but cannot hold on any longer.’’ He refers to the group as “the invisible class of debtors who can’t afford to file.’’

It can cost as little as a few hundred dollars to file for bankruptcy, but the tab can jump to several thousand dollars depending on the complexities of the filing. People who have a house, for example, would pay more.

“We see people every day who can’t afford to file,’’ said Matthew Berry of Berry & Associates, an Atlanta bankruptcy law firm.

The number of bankruptcy petitions likely will rise when the employment situation improves, Berry said. When they are back at work, financially troubled individuals will be able to pay the price to file, and they will have the income to pay their creditors.

“As they go back to work,’’ Berry said, “collectors become more aggressive, and that will force them into bankruptcy.’’

Just how many bankruptcy cases are lurking in the shadows is unknown. Experts who suspect a large number of dormant cases base their assessments on the state of the economy and the number of filings at this time, which is lower than what would be expected given the dire condition of the economy.

Shadow bankruptcy cases are a concern in the business world, too, particularly for small companies. In some case, troubled firms do not file for bankruptcy, Williams said.

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How to Recover From Bankruptcy

According to a recent report by US and World Reports, "If you have recently filed for bankruptcy, perhaps you can find some comfort in the fact that you are not alone. According to the American Bankruptcy Institute, the total number of bankruptcy filings in the United States increased 8 percent in 2010, to a total of 1.6 million, and the numbers for 2011 are expected to rise even higher.

But just because bankruptcy is increasingly common doesn't make it any less stressful. People who file for bankruptcy often feeling ashamed, overwhelmed, and hopeless. Here are eight tips on how to recover:

Address what caused the bankruptcy. Perhaps you need to set a new budget or look for new types of employment, so you don't find yourself in the same financial straits five years from now.

Identify your goals. Recovering from bankruptcy can mean anything from reestablishing a healthy credit score to paying off all of your debts. To help focus your progress, pick a handful of top goals to work toward.

Check your credit score. Inaccurate information often plagues credit reports, which can affect everything from job applications to mortgage rates. Simply removing incorrect information often significantly improves your score.

Gradually re-establish credit. Taking out two credit cards and paying them off fully each month can help rebuild a credit score that's been dragged through the mud. After one year, that score will start to improve, and after seven to 10 years, it could look as good as new.

Find a new credit card issuer. While lenders often hesitate to give credit cards, car loans, and other forms of credit to people with a history of troubled loans, it's usually possible to find a willing lender. The terms might not be ideal, but new accounts will help rebuild credit history.

Over the last two years, card companies have tightened their standards in the wake of rising default rates and have raised interest rates even on reliable customers. Card comparison sites can help maximize the chances of getting the best deal possible. Secured cards, which function more like debit cards, are often the best option for those trying to rebuild their credit.

Avoid unfair deals. Predatory lenders often target vulnerable groups, including recent bankruptcy filers. That's why recent filers should be wary of organizations and companies offering payday loans and rent-to-own deals that carry high interest rates. Consumers are often so eager for credit approval that they jump on contracts with high interest rates, but it's usually better to wait.

Seek support. People recovering from bankruptcy can feel like social pariahs; finding yourself in this situation can be embarrassing and even shameful. But online communities of people going through the same thing can help provide the much-needed emotional support.

Think positively. Most people's credit improves after filing for bankruptcy, because debts are cleared to give them a fresh start. While the bankruptcy filing will stay on your credit report for 10 years, many creditors are willing to take a chance on lending to those who have been in bankruptcy.\

Sometimes working with a professional credit counselor or bankruptcy attorney can help make the recovery process easier; bankruptcy attorneys often offer free initial consultations and then arrange for future payments. It's not always expensive. Some professionals provide services at reduced rates or even for free. But if anyone promises to improve your credit score quickly or makes another offer that sounds too good to be true, there's a good chance it's a scam. Be sure to research any company or individual counselor online before working with them to ensure your path away from bankruptcy is as bump-free as possible".


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Hawaii Bankruptcy Filings Flat in May

According to an article in Honolulu's Star Advertisor... "Statewide bankruptcy filings were virtually flat in May, but there was a spike in Chapter 13, or so-called wage-earner, cases.

Total filings slipped 0.6 percent to 334 from 336 in the year-earlier period and marked the fourth time in five months this year that the number of cases had decreased from the same month in 2010, according to data released yesterday from the U.S.  Bankruptcy Court, District of Hawaii.

For the year, the 1,567 cases filed are 5.1 percent lower than the 1,651 filings through May of last year.

There were no Chapter 11 reorganization filings by Hawaii businesses in May, though two businesses, Oahu-based B.J. Genz Plumbing LLC and Vision Communications Inc., which does business on Kauai as Kekaha Enterprises, filed for Chapter 7 liquidation.

While the number of Chapter 7 cases, which offer debt liquidation, dropped 10.4 percent in May from a year ago, the number of Chapter 13 filings shot up 40.9 percent, to 93 cases from 66 for the same period. One reason could be the number of homeowners "trying to save their home" from foreclosure, said bankruptcy attorney Edward Magauran.

"People are facing foreclosure and they're also at the same time racing to modify their mortgages under the HAMP (federal Home Affordable Modification Program), and they're not getting it done. Either the bank isn't taking them seriously and doesn't modify their mortgages, or foreclosure is breathing down their necks, so a lot of people will file a Chapter 13 to keep their real property," he said.

In such cases, filers can keep their real property, even if they are behind on payments, provided they make their regular  monthly mortgage payments on time from and after the date of filing, and pay the Chapter 13 trustee a monthly amount to be disbursed to creditors, Magauran said. "The mortgage company then must treat you as being current, provided you do both of those things," giving filers the opportunity to attempt to complete a mortgage loan modification.

"The other absolutely, unbelievable, beautiful thing that you can do in a Chapter 13 that you cannot do in a 7, and we're seeing more of these, is lien stripping," he said. That practice strips a second mortgage from real property, as long as the homeowner owes more money on the first mortgage than the current fair market value of the property, Magauran said.

Other debts also may be restructured and partially discharged in Chapter 13 cases, Magauran said.

Some Chapter 13 filers probably should have filed under Chapter 7, said bankruptcy attorney Blake Goodman, but to some attorneys,"it's all about fees, to be extremely honest." A Chapter 13 case might cost an average of $4,000 to complete, while a Chapter 7 case can cost a filer between $1,200 and $1,500.

However, the "whole idea" behind the 2005 change in bankruptcy law was to "force more people into Chapter 13," so that more  of their debt would be paid off, rather than discharged through Chapter 7 filings.

Given that, a Chapter 13 case is "a very powerful tool for a lot of things that a Chapter 7 cannot help with," said Goodman, who has represented bankruptcy clients in three states over 21 years.

The 93 Chapter 13 filings represent just under 28 percent of the May total, which Goodman believes underrepresents the "number of cases that should be filed to service the debt problems that are out there." A more realistic split between the types of personal bankruptcy filings is 40 percent Chapter 13 and 60 percent Chapter 7, he said.

In any event, Goodman's case load has somewhat lightened since last year when professionals in various industries were "lined  up around my office," making his current outlook on the economy "very rosy" compared with a year ago.

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Posted in bankruptcy filings , Chapter 11 Bankruptcy , Chapter 13 bankruptcy , Chapter 7 Bankruptcy , foreclosure , statewide bankruptcy