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VOL. 125 | NO. 74 | Friday, April 16, 2010

Bankruptcy Numbers Drop 6 Percent in Q1

By Andy Meek

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The U.S. Bankruptcy Court for West Tennessee processed fewer bankruptcy petitions during Q1 compared to the same period last year.

But the size of the drop makes it unclear whether to expect a long-term break in the clouds.

The 6 percent decrease in bankruptcy filings is among the kinds of tealeaves economists are watching closely. There were 4,595 filings in Q1 this year, a drop from the 4,887 in Q1 2009.

The U.S. Bankruptcy Court has offices in Memphis and Jackson, and debtors can come from anywhere in the district to file.

Frayser’s 38127 ZIP code led the quarter for bankruptcy filings, with 268. Raleigh’s 38128 ZIP code followed close behind, with 228.

Along with housing, credit and jobs-related data, the bankruptcy rate indicates how widely the recession’s pain is still felt.

To fully appreciate the number of the quarter’s bankruptcy filers, consider that nearly 4,600 debtors could fill Downtown’s Cannon Center for the Performing Arts to capacity – twice.

“What I’m seeing – the numbers are either steady or down a little bit,” said Memphis bankruptcy attorney Jimmy McElroy, one of the attorneys with the highest-volume caseload in the local bankruptcy court. “But what I’m also seeing is people filing bankruptcy – especially Chapter 7 – who’ve never thought about or considered filing bankruptcy before.”

The 4,595 petitions filed in West Tennessee in Q1 2010 included drops in two of the major and most closely watched types of bankruptcy: Chapter 7, or “liquidation” cases, and Chapter 13, or “wage-earner cases.”

Chapter 7 filings dropped about 1 percent, from 1,535 in Q1 2009 to 1,518 in Q1 2010. Pursuing that kind of bankruptcy case usually lets the most hard-pressed debtors wipe away most of what they owe.

Debtors filed almost three times as many Chapter 13 cases during the quarter, which is the norm in Memphis. Debtors filing Chapter 13 plans agree to stick to a court-approved repayment plan for a percentage of their debt.

Those filings dropped too during the quarter, from 3,335 in Q1 2009 to 3,055 in Q1 2010.

However, the drop during the quarter still didn’t match the larger run-up in filings that happened at the height of the recession.

That period saw a 15 percent jump in bankruptcies from Q1 2008 to Q1 2009 – from 4,236 to 4,887.

The country has spent months mired in one of the most painful, far-reaching and job-killing recessions since the 1930s.

The Federal Reserve’s just-published Beige Book, a collection of market snapshots from its 12 regional districts, paints a mixed picture for the district encompassing Memphis.

That falls in line with the quarter’s bankruptcy numbers.

“Manufacturing activity declined on balance, as did activity in the services sector,” the Fed reported for the local area. “Although residential real estate markets remained weak, home sales and issuance of construction permits increased in some metropolitan areas of the district.

“Activity in the commercial and industrial real estate markets, construction in particular, remained weak throughout the district.”

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RECORD TOTALS DAY WEEK YEAR
PROPERTY SALES 87 87 14,804
MORTGAGES 80 80 19,410
FORECLOSURE NOTICES 22 22 3,817
BUILDING PERMITS 142 142 35,472
BANKRUPTCIES 62 62 14,096
BUSINESS LICENSES 62 62 5,053
UTILITY CONNECTIONS 99 99 21,532
MARRIAGE LICENSES 37 37 4,594

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