Bankruptcy filings in Shelby County were up slightly in 2012 compared to 2011. Chapter 13 filings with repayment plans made up most of the total.
The 12,471 filings in 2012, according to The Daily News Online, www.memphisdailynews.com, were 57 more than for 2011, or a 0.4 percent increase.
Of the total, 9,534 were chapter 13 filings, 266 more than in 2011 or a 2.8 percent increase.
Chapter 7 filings, where a company goes out of business and a trustee liquidates its assets to pay creditors, totaled 2,908, which is 104 fewer than the year before, or a 3.5 percent decrease.
There were 29 Chapter 11 filings, which involve a complex reorganization plan, down five from 2011.
The top ZIP code for bankruptcies for the year in Shelby County was Frayser’s 38127, which had 1,011 bankruptcies across the three categories. In 2011, Westwood’s 38109 ZIP code led the year-end totals. The Frayser ZIP code topped the 2010 bankruptcy totals.
The bulk of the Frayser bankruptcies, 862, were Chapter 13 filings. And Frayser led all ZIP codes in Shelby County in the number of Chapter 13 filings it had.
But it didn’t lead the pack with its 149 Chapter 7 filings and it had no Chapter 11 reorganizations for the year.
Steve Lockwood, executive director of the Frayser Community Development Corp., is familiar with Frayser’s high level of bankruptcies.
“I would say the reason it maintains a high level here is, in part because people get bad advice. Some financial literacy skills are low. There’s no doubt about that,” he said.
“Unemployment’s high. Property values are low. Those are concrete things that change people’s financial realities.”
Among the services offered by the Frayser Community Development Corp. is financial literacy counseling.
“We don’t do as much as we wish we could. … Of all the counseling that we do, the thing we do the least of is our basic financial literacy counseling. But it’s free and it’s available,” Lockwood said. “We do more on foreclosure counseling and homebuyer education counseling. Coming up a distant third is the financial literacy counseling, which we’d like to push harder.”
More of the counseling could be a start toward some different numbers in the Chapter 13 filings.
“People get a lot of bad advice and often times file for 13 when it’s not in their interest to do so when they really probably had other alternatives,” he said. “They don’t shelter you from everything. Many people don’t succeed at Chapter 13 and those that do can come right back out and be foreclosed on.”
The Frayser ZIP code shows double-digit unemployment percentages as the countywide rate remains below 10 percent. Lockwood compared 2000 and 2010 census data and found unemployment in 38127 went from 8 percent to 17 percent in the decade. That is not as high as other ZIP codes in Memphis. But couple that with the searing effect the foreclosure crisis had on Frayser in particular and the combination is powerful.
In other ZIP codes, Southeast Shelby County’s 38125 had 201 Chapter 7 bankruptcy filings to top that category, and Collierville’s 38017 had the most Chapter 11 bankruptcy filings for the year with five.
October was the busiest month for filings across the three categories with 1,262, but only three months, January, April and December, showed filings less than 1,000. Of the 1,262 filings in October, 1,008 were Chapter 13 cases.
In 2011, September was the busiest month for bankruptcy filings with 1,190. And six months posted numbers in 2011 that were less than 1,000.
The ZIP codes, or even the court district a bankruptcy reorganization is filed in, don’t always reflect the impact of the filing.
The highest profile bankruptcy filing in the city in 2012 wasn’t filed in the western district of Tennessee.
It was the April Chapter 11 reorganization filing by Memphis-based Pinnacle Airlines Corp. and its subsidiaries. Pinnacle headquarters is in One Commerce Square, a skyscraper that is part of the Memphis skyline.
Because the company’s subsidiary Pinnacle Airlines Inc. is incorporated in New Windsor, N.Y., it filed its bankruptcy petition in the southern district of New York state.
Chapter 11 is considered the most complex bankruptcy filing and Pinnacle is a textbook example of why.
The company has been through two reorganization plans since April. The court approved the second plan just this week.