ECON - NC businesses, individuals declare bankruptcy in record numbers

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Raleigh N&O

Published: Sunday, September 2, 2001 5:03 p.m. EDT

Businesses, individuals declare bankruptcy in record numbers

GREENSBORO, N.C. (AP) -- The number of area bankruptcy filings for the year are increasingly rapidly thanks to a slowing economy, rising consumer debt and layoffs in the state's struggling manufacturing sector.

Through July 31, there have been 6,238 filings in U.S. Bankruptcy Court for the Middle District in 2001, up 19 percent from the same period in 2000. The district has 24 counties, including Guilford, Rockingham, Davidson, Alamance and Randolph counties.

In addition, bankruptcy filings increased 27 percent in July 2001 compared to the same period last year.

Nationally, bankruptcy filings increased 21 percent through June 30 compared with the same period last year, according to the Administrative Office of the U.S. Courts.

This year's total compares to 9,403 filings in all of 2000, marking an all-time high, said Linda Ball, chief deputy clerk for the court.

"Business bankruptcies rise when the economy turns down," said John Boddie, a Greensboro bankruptcy lawyer. "Consumer bankruptcies really don't have a whole lot to do with economic downturns except with the rise in consumer credit. I think right now we're seeing both."

Charles Ivey III, a bankruptcy lawyer in Greensboro, said publicized attempts by federal lawmakers to make it tougher to file for bankruptcy have also triggered a wave of filings by people trying to beat the deadline.

"That sort of pushed them over the fence," he said.

Ivey said the economic slowdown also has played a role in the increase, especially in North Carolina, where textile-industry layoffs have been on the rise. In July, the Piedmont Triad had the second-largest rise in unemployment of the nation's 51 large metropolitan areas, according to the U.S. Department of Labor.

People who filed for bankruptcy this year cited reasons including an inability to handle rising consumer debt and creditors becoming increasingly impatient.

Preston Earle, president of Greensboro Printing Co., the city's oldest printing firm, announced his company was closing June 21 and filing for bankruptcy.

"Business had been difficult this past year," Earle said. "We expanded, and the bank had been cooperative with us until the day they decided to call off the loans, basically pulling the plug on the company," Earle said.

Daniel Hughes, president of North west Tree & Stone Inc., a nursery in McLeansville, filed under Chapter 11 bankruptcy April 25. Chapter 11 allows businesses to continue operating while they create a plan to repay their creditors.

Hughes described being involved in a bitter and costly land-zoning dispute with Guilford County concerning how he can operate his business after relocating to McLeansville from another part of the county. That has resulted in his company being fined thousands of dollars and business slowing down, he said.

"It really had nothing to do with the economy," Hughes said. "Ours is an exception to the rule."

-- Anonymous, September 02, 2001

Answers

When I was just a kid, back in the 1940s, it was usually considered a shameful thing to declare bankruptcy. It was a public admission of failure to achieve something you had attempted to do. That all seemed to change as the years ticked along and by the 1970s I noticed that people and businesses were using bankruptcy filings as merely a way to avoid being responsible to those you owed. An easy cop-out.

I still think it's shameful to stick others with your own failures. Most bankruptcy filings seem to be a chicken way to avoid having to pay for services you owe, but don't really want to be stuck with. When someone takes risks, or borrows large amounts of money, in order to further their own plans and desires, they really shouldn't have it so easy as the current law allows. How can we justify sticking others with our own mistakes?

-- Anonymous, September 02, 2001


Well it is one way to protect your ability to borrow money. We don't have a picture perfect credit record, but have been paying off a huge amount of debt including the farm (and paying cash for everything for the farm -no operating loans) and we can't re-finance our farm. I point blank asked the bank president if we had declared bankruptcy on our debt, would he have re-financed us and he said yes, but because we are trying to pay off all of that debt they won't. At this point I wished we had declared bankruptcy because we may lose our farm if we can't re-finance it into a regular mortgage. The worse part of it is that with the equity in our farm, we were asking for a 50% mortgage - meaning that they had twice as much collateral as we were borrowing money.

So until the lending institutions make it difficult for those that declare bankruptcy, people are going to walk out on their debt when the going gets tough.

-- Anonymous, September 02, 2001


If you are finding it hard to re-finance 50%, then why not go for 100 or 110%? If they go for that, then the balance you didn't want can earn money in a CD or IRA or some such, even just a savings account.

Or you can turn around and pay half of it off quickly. Or make double payments and pay it off twice as fast.

Wouldn't that work?

I never declared bankruptcy, just ignored the lenders for a while, until I was in a position to do something about the accounts. By then, of course, it was too late. They had written them, and me, off.

Later on, I was in a position to want to do something, and in order to do that, I needed to get the payoff amounts from the lenders. I got those amounts, along with the actual amounts I owed up to the time they closed the accounts. I paid what I owed, not the payoff amounts.

It was more a psychological thing for me. I felt I had to do it, even though it didn't make any difference on my credit report whether it was in full or the payoff amount they gave. The loan officer I was dealing with kept telling me that, but I said that since I owed X amount, I was paying X amount, and X-Y wasn't right. She finally understood it was just something I felt I needed to do. I know I felt better after those were all cleared up. Talk about a cloud over my head.

No one I knew then understood why I did it, and they kept telling me I was just giving away the money. Maybe so, but for me it was the right thing to do.

I have an aquaintance who declared bankruptcy. Just before he did, he maxed a couple of his cards out, clothes and furniture and a couple trips. Then he filed and walked away. I don't know how he can live with himself. Then again, considering the way he lives, I guess it was easy for him.

Making it harder to declare bankruptcy may not be the answer. Maybe getting credit should be harder to do. They can start be ending those pre-approved credit card offers. I must be getting about ten a week now.

AS a matter of fact, I am considering going to Rooms-2-Go and seeing about getting a new bedroom set. I never had one that matched, before. They say no payments until 2003. LOL

-- Anonymous, September 02, 2001


Barefoot, we can borrow 2 cents from our bank because of the credit report. I told DH that when we get this all straightened up and have a good credit report that I wouldn't borrow money from this bank for any reason. This same bank has lent money to farmers that went bankrupt on them in the '80s and are close to doing it again, but they are the "good ol boys" after all.

-- Anonymous, September 03, 2001

Iowa bankruptcies rise By WILLIAM PETROSKI Register Staff Writer 09/03/2001 ---------------------------------------------------------------------- ---------- The number of bankruptcies is soaring in Iowa, which has had one of the nation's highest rates of increases in bankruptcy filings.

For the 12 months ending June 30, Iowa's northern judicial district had a 22.4 percent increase in bankruptcy filings. That was the seventh-highest increase in the United States and its territories.

Iowa's southern judicial district, which includes Des Moines, had a 20.6 percent increase, which was the ninth highest, according to data from the Administrative Office of the U.S. Courts.

Nationwide, bankruptcy filings are on track to surpass the record- breaking year of 1998, when 1.4 million new cases were filed, according to the American Bankruptcy Institute, a nonpartisan research and education organization.

"The figures for the first half of this year are alarming, if not shocking," said Samuel Gerdano, the institute's executive director.

The overall rate of Iowa bankruptcy filings had been well below the national average, and that trend continues despite the recent sharp increases. For the 12 months ending June 30, Iowa had one bankruptcy filing per 114 households, which ranked 34th nationally. From 1997 through 2000, the number of total bankruptcy filings declined each year in Iowa.

Statewide, Iowa had 9,928 total bankruptcy filings for the 12 months that ended June 30. That included 268 business filings and 9,660 non- business filings.

Experts said last week that bankruptcies are surging because of a slowing economy, high accumulations of consumer credit-card debt and worries about proposed changes in federal bankruptcy law. The changes could make it tougher for some consumers to walk away from their debts.

"There are a lot of layoffs," said John Miller of Des Moines, who is one of Iowa's busiest bankruptcy lawyers, filing about 500 cases annually. "Some industries are being hit worse than others. The trucking industry has been in really bad shape for a year and a half to two years. Tech companies . . . have been closing down and laying off employees."

Iowa had an unemployment rate of 3.1 percent in July, the highest since December 1997. Some economists say the state's economy continues to be relatively healthy, but Miller said many Iowans who are losing their jobs aren't finding new jobs that pay as well.

Jack Williams, resident scholar at the American Bankruptcy Institute, said many people in Iowa and other parts of the country are particularly vulnerable to a slowing economy because they have high levels of personal debt and low levels of savings while their consumption has been increasing.

"The economy is manufacturing a class of high-risk debtors. As long as their source of income is in place, they can make payments on their credit cards. But if they are out of work for even two or three months, there is no way they can catch up," said Williams, who also is a law professor at Georgia State University.

Many Iowans filing for bankruptcy are senior citizens who can't maintain their lifestyles on fixed incomes, Miller said.

"A big factor, especially with older folks, is that their prescriptions become a budget item that they have never experienced before. It can be an amazingly large budget item," he said.

Tom Coates, who heads Consumer Credit of Des Moines, Iowa's largest debt counseling agency, said he is seeing the bankruptcy surge firsthand. His staff members have been providing 600 counseling sessions per month to troubled consumers.

"We are blowing the doors off of anything we have ever done before," he said.

Michael Jankins, a Des Moines bankruptcy lawyer, said there is no doubt that pending federal bankruptcy legislation is spurring some Iowans to file before a new law takes effect.

"Not a day goes by that I don't talk with somebody who asks, "Can I still file for bankruptcy?" " he said.

However, compared to other parts of the United States, Jankins said, he sees little evidence of Iowans abusing the bankruptcy system to ward off creditors.

"I really don't think that Iowa, in the scheme of the country, is a bastion of bankruptcy filings," he said.

Several bankruptcy lawyers said that legalized gambling at racetracks and riverboats in Iowa plays a role in some bankruptcy filings in the state, although they don't view it as a major factor. Coates, who is opposed to gambling, said 10 percent to 15 percent of his clients have financial troubles primarily because of gambling debt.

Wes Ehrecke, executive director of the Iowa Gaming Association, a casino industry group, said his organization has examined more than 700 Iowa bankruptcy cases from the past six years. About 2 percent of the filers reported having gambling income or gambling losses, he said. Some officials, however, contend that bankruptcy filers don't always report their gambling involvement because of embarrassment over their losses.

-- Anonymous, September 03, 2001



As I have posted previously, I believe this time we have on earth in our physical form is really nothing more than a soul journey, a time to learn lessons and move further along whatever path we have chosen. There are two possible paths to follow, service to self, and service to others. Most of us start out on the service to self path and we are constantly tempted to remain on that path.

According to some things I have studied, the service to self path is a negative path, meaning it's charged with negative energy. The service to others path is a positive one, charged with positive energy. Either path is valid and they are both balanced in a cosmic sense. We get to choose the one that appeals to us the most.

When we engage in taking risks, borrowing money, planning for our lives, we will end up with some obstacles to overcome. One of those obstacles is getting into financial problems. At that point we will choose whether to make good on our previous promises and agreements, or to duck out of them. At that point we will choose which path we are most attracted to. It is literally a defining moment for us.

-- Anonymous, September 03, 2001


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