Tuesday, June 9, 2009
Bankruptcy Filings Continue to Rise, Officials Say
Judge Russell Predicts Tide Will Get ‘a Lot Worse’
By a MetNews Staff Writer
Bankruptcy filings for the 12-month period ending March 31 were up 33.3 percent nationwide over filings for the 12-month period ending March 31, 2008, according to statistics released yesterday by the Administrative Office of the U.S. Courts.
Data specific to the Central District of California was unavailable, but bankruptcy filings across the nation totaled 1,202,503, compared to the 901,927 cases filed in the 12-month period ending March 31 last year.
The largest percentage increase occurred in Chapter 11 filings, a 69.1 percent increase over March 2008 Chapter 11 filings.
U.S. Bankruptcy Judge Barry Russell, a former chief bankruptcy judge for the Central District of California, told the MetNews the increase “doesn’t surprise me at all,” and said “it’s going to get a lot worse before it gets better.”
According to the Administrative Office of the U.S. Courts, a significant decline in bankruptcy filings occurred in October 2006, after many of the provisions of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 took effect.
The office said bankruptcy filings have risen steadily since then and the March 2009 total filings are the highest since BAPCA was implemented.
Russell attributed the rise to the nation’s unemployment rate—currently at 9.4 percent according to the U.S. Labor Department—and he said the increase in joblessness would likely lead to a “substantially higher” number of bankruptcies given that the majority of filings involve consumers rather than businesses.
Non-business filings—also called personal or consumer filings—for the 12-month period ending March 31 totaled 1,153,412, up 32.4 percent from the 871,186 bankruptcies filed in the 12-month period ending on that date last year.
Filings involving predominantly business debts also rose. They totaled 49,091, up 59.7 percent from the 30,741 business bankruptcies filed in the 12-month period ending March 31 last year, and Russell said the loss of medical insurance by former employees was also likely a factor.
For the 12-month period ending March 31, 2009, filings rose in all four of the bankruptcy chapters most often utilized in comparison to the same time period ending one year ago:
•Liquidations under Chapter 7 rose 46.3 percent to 819,362, compared to the 560,015 in the previous period;
•Readjustments under Chapter 13 rose 10.9 percent to 370,875, from 334,551 in the previous period;
•Reorganizations under Chapter 11 rose to 11,785, compared to 6,971 in the previous period;
•Readjustments for family farmers and fishermen under Chapter 12 rose 7.0 percent to 367, from 343 filings in the previous period.
Russell also predicted that bankruptcy courts might see an increase in filings under Chapter 9, which applies to adjustment of debts for municipalities, such as counties and cities, and quasi-municipalities, such as local water districts.
Such filings are usually driven by the need to modify pension funds and union contracts, he said, and commented that courts could see “a whole slew” of filings if the nation’s economy continues to decline.
Copyright 2009, Metropolitan News Company