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VOL. 126 | NO. 10 | Friday, January 14, 2011

Bankruptcy Trends Shift, Local Numbers Drop

By Aisling Maki

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Bankruptcy attorney Jimmy McElroy, one of the Memphis court’s top filers, has noticed a recent change in local bankruptcy trends.

Today he’s seeing older, more established individuals filing for bankruptcy. That’s a shift from the traditional notion of people filing when they’re younger and less experienced in handling their finances, or habitual filers who declare bankruptcy multiple times over the course of their lives.

“Some people have worked for the same place for 20 or 30 years and their plant shuts down,” McElroy said.

“I’m seeing people who you’d think would be getting ready to enjoy their retirement, who had worked hard all their lives, and are really having financial problems. People are filing for bankruptcy who you’d never think would ever have to file bankruptcy.”

One positive trend to emerge from the latest data is that bankruptcy filings in Shelby County declined slightly in 2010, falling 7.7 percent from about 19,500 in 2009 to 18,000 last year, according to real estate information company Chandler Reports, www.chandlerreports.com.

Chapter 7 bankruptcies, those filed by the most hard-pressed debtors who usually get to wipe away most of what they owe, were down slightly with 5,416 in 2010 compared to 5,734 in 2009.

Cordova saw the highest incidence of filings, followed by Southeast Shelby County, Hickory Hill, Westwood and Bartlett.

Chapter 13 bankruptcies, which involve a court-ordered debt repayment plan, were down as well, with 12,489 last year compared to 13,687 in 2009.

Frayser had the most filings, followed by Westwood, Oakhaven/Parkway Village, Whitehaven and Raleigh.

McElroy said he doesn’t foresee continued improvement in 2011 as the economic slump toils on.

“We’re still having a lot of financial problems,” he said. “There are still a lot of foreclosures happening and a lot of people are still out there looking for jobs. I don’t think the numbers are going to go down significantly. They might taper off slightly, but it’s going to be pretty steady.”

McElroy said that with so many job losses, he also has seen tremendous student loan debt – something that can almost never be wiped out.

Q4 Bankruptcies See Slight Decrease

The period from October to December of 2010 showed a slight decrease in individuals filing for bankruptcy in West Tennessee, according to The Daily News Online.
The U.S. Bankruptcy Court for the Western District of Tennessee has offices in Memphis and Jackson, though debtors from anywhere can come to the district to file.
Chapter 7 cases, also known as liquidations and typically the simplest and speediest type of bankruptcy for the hardest-pressed debtors, dropped from 1,309 in Q4 2009 to 1,202 in Q4 2010.
Chapter 13 filings, or “wage-earner” cases, which involve a court-ordered debt repayment plan, totaled 3,033 in the fourth quarter compared to 3,438 in the last quarter of 2009.
The only slight drop suggests an anemic recovery in which individuals continue to grapple with job losses, foreclosures and mounting debts. 
Q4 2010 saw a slight climb in Chapter 11 filings, often used by businesses to declare bankruptcy reorganization. There were 17 compared with 15 in the same period in 2009.

– Aisling Maki

“They’re in deferment because they’ve lost their jobs,” he said. “I’ve seen people who owe over $100,000 in student loan debt. Eventually, it’s going to catch up. It doesn’t go away, unless you have some kind of a medical hardship to discharge student loans, but it’s really hard to do. If you have any kind of income, you’ll probably have to pay them back.”

In terms of businesses filing for bankruptcy, 2010 saw a total of 63 Chapter 11 filings, down from 73 in 2009.

Whitehaven was worst off, followed by the Defense Depot area and Germantown, both with four filings.

The 2010 filings included Wurzburg, a Memphis-based provider of supply-chain logistics and packaging that had been in business since 1908.

Landsberg, a packaging, janitorial and food service shipping supply company, announced in May that it had obtained approval of a Memphis bankruptcy court to purchase Wurzburg’s assets.

Also, Performa Entertainment filed for Chapter 11 bankruptcy reorganization in 2010, just as Memphis Mayor A C Wharton Jr. announced that the city had finally reached a settlement that agreed to end more than a decade of litigation over the flow of money through Beale Street businesses.

One of the biggest bankruptcy stories from 2010 involved Looney Ricks Kiss Architects Inc., which spent the first half of the year worked to reorganize itself after filing for Chapter 11 in late 2009.

The news sent shockwaves through an industry still reeling from dried-up financing for private projects and decreased business. Now known simply as LRK Inc., the company turned a corner in 2010 with a new look and a slimmer workforce.

“Our focus has been continuing to serve the clients that we have,” Frank Ricks, the firm’s managing principal, told The Daily News in August. “And some of them are beginning to see their situation thaw out a little bit, so we’re seeing some signs of improvement, but I don’t think any of us expect it to be a rapid turnaround.”

Also, prominent homebuilder David Miller filed Chapter 7 bankruptcy in 2010 citing $58 million in losses, a sign of the home construction industry’s continued woes.

RECORD TOTALS DAY WEEK YEAR
PROPERTY SALES 85 305 21,577
MORTGAGES 62 223 16,417
FORECLOSURE NOTICES 0 17 1,504
BUILDING PERMITS 0 571 42,491
BANKRUPTCIES 34 138 6,717
BUSINESS LICENSES 40 72 3,169
UTILITY CONNECTIONS 0 0 0
MARRIAGE LICENSES 0 0 0