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VOL. 127 | NO. 13 | Friday, January 20, 2012

Drop in Bankruptcies Belies Economic Picture

By Aisling Maki

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Although the total number of bankruptcies filed in Shelby County has slowly declined over the last three years, attorney Joseph Townsend with Fullen & Townsend Attorneys said fewer filings aren’t necessarily a sign that the economy is on the upswing.

“It’s just the opposite,” Townsend said. “I think that the filings are down because people can’t afford to file. What we’re seeing is people are out of work and they don’t have the money to fund the Chapter 13 plan.”

Chapter 13 filings involve a court-ordered debt repayment plan, and Townsend said he’s seen some of his clients covert to Chapter 7 plans because they couldn’t afford the debt repayment.

“We’ve seen a bunch of people give up their houses this year because they couldn’t afford them,” Townsend said. “So, I’m not seeing it as better, I’m seeing it worse. Just because they (filings) go down doesn’t mean the economy is improving for lower-income people.”

Townsend said medical bills continue to be a major reason people file for bankruptcy, and one of 2011’s major trends was filings by higher-income households with two wage earners, where one lost his or her job.

“They lose their job and it takes them six months to a year to get a new job, and they’re making half the amount of money,” he said. “Then they incur all this credit card debt while they’re trying to take care of the unemployment, and they can’t catch up.”

All chapters combined declined slightly in 2011, falling to 12,414 last year from 12,461 in 2010, according to The Daily News Online, www.memphisdailynews.com.

United States Bankruptcy Court, Western District of Tennessee, has offices in Memphis and Jackson, Tenn. However, the data in this report include only ZIP codes within Shelby County. In effect, it examines the number of bankruptcies filed by Shelby County debtors in local bankruptcy court.

Chapter 7 bankruptcies, those filed by the most hard-pressed debtors who usually get to wipe away most of what they owe, also decreased, with 3,112 in 2011 compared to 3,282 in 2010.

Cordova North’s 38016 ZIP code again saw the highest incidence of Chapter 7 filings with 177, followed by Hickory Hill North’s 38115 with 171, Southeast Shelby County’s 38125 with 168, Raleigh’s 38128 with 164 and Oakhaven/Parkway Village’s 38118 with 161.

One notable Chapter 7 filing was that of real estate developer William R. (“Rusty”) Hyneman in March. His nearly 60-page petition identified close to 50 creditors and liabilities of $69.3 million.

Hyneman in the past has been a controversial backer of several figures on the local political landscape. A $70,000 Rolex watch he allegedly gave to former state Sen. John Ford was among the items seized by the government in the Tennessee Waltz federal corruption case against Ford.

Lane Carrick also filed Chapter 7 bankruptcy in September after he resigned as a director and chairman of Triumph Bank and Triumph’s parent company. He had more than three decades of experience in the financial services industry, including work as a consultant to United Capital and as chairman and CEO of Sovereign Wealth Management.

In 2011, Chapter 13 bankruptcies saw a slight increase, with 9,268 compared to 9,134 in 2010.

Westwood’s 38109 saw the most Chapter 13 filings with 840, followed by Frayser’s 38127 with 810, Raleigh’s 38128 with 749, Whitehaven’s 38116 with 722 and Oakhaven/Parkway Village’s 38118 with 691.

Looking at businesses, fewer filed for bankruptcy last year; 2011 saw a total of 34 Chapter 11 filings, down from 45 in 2010.

Whitehaven’s 38116 again had the most filings with seven, followed by Collierville’s 38017, Jackson/Farmville’s 38108 and Bartlett’s 38134, each of which had three filings.

In Q1 2011, several liquor stores declared bankruptcy: The Brown Jug Beer Barn in Cordova, Central Wines & Spirits in Germantown, and B & B Liquor in Memphis.

Beale Street Blues Company-Las Vegas LLC, the Memphis company that owns B.B. King Blues Club in Las Vegas, received national attention when it filed for Chapter 11 reorganization in February.

Beale Street Blues Las Vegas, located inside The Mirage, claimed assets of $2.5 million and liabilities of $3.8 million. Named for blues legend B.B. King, the club is one of five across the country, including the original in Memphis. The Memphis club wasn’t directly affected; neither were the other locations in Orlando, Fla., Nashville and West Palm Beach, Fla.

PROPERTY SALES 81 277 20,909
MORTGAGES 85 329 24,074
BUILDING PERMITS 219 672 43,265
BANKRUPTCIES 64 238 13,418