Current News |
Rise of Bankruptcy Rate
in Region Outpaces Rest of Nation
By PATRICK McGEEHAN
Published: December 15, 2008
http://www.nytimes.com/2008/12/16/nyregion/16bankruptcy.html?th&emc=th
Bankruptcy filings are accelerating in
the New York metropolitan area at a
faster pace than in the rest of the
nation, according to figures released on
Monday by the federal bankruptcy courts.
In the federal courts that serve the
region, filings for bankruptcy
protection — by individuals and
businesses — were pouring in at the rate
of about 175 per day in the three-month
period that ended Sept. 30, the data
showed. The filings in the city, New
Jersey and Connecticut increased by more
than 36 percent in the quarter, faster
than the nationwide increase of 34
percent.
The statistics show that the rising tide
of American bankruptcies that had
already reached the surrounding areas of
New Jersey and Connecticut has now
rolled into the city. As unemployment
rises, more consumers are falling behind
on their debts and creditors have been
increasing pressure on them to repay,
bankruptcy lawyers said.
“We are seeing debt-collection efforts
really being ratcheted up over the last
couple of months,” said Jay S.
Fleischman, a bankruptcy lawyer in Park
Slope, Brooklyn. “What we’re seeing is
the debts being sued upon far earlier in
the process. That leaves consumers with
the feeling that they don’t have the
options they once did.”
Rather than seeking to work out
repayment terms with the lenders or
through credit counselors, more
borrowers are filing for court
protection from their creditors, Mr.
Fleischman said. “Our clients now tend
to be people who had better-paying jobs.
More of the middle class and
upper-middle class is being forced to
consider this option as a result of job
losses and the erosion of home values.”
The two federal courts in the city — one
in Manhattan and one in Brooklyn —
recorded about 36 percent more filings
in the third quarter of 2008 than in the
same period last year. In the second
quarter, filings in those courts rose
about 30 percent, slower than the
nationwide pace.
As usual, the bulk of the filings were
made by individuals under Chapter 7 of
the federal bankruptcy code, known as
liquidations. For example, in the
Eastern District Court in Brooklyn,
nearly 75 percent of the 4,323
bankruptcy filings were personal Chapter
7 liquidations, while just 126, or 3
percent, of the filings were by
businesses.
In Southern District Court in Manhattan,
business filings made up about 8 percent
of the 2,641 filings in the third
quarter. But filings by businesses
looking to reorganize their debts were
rising at a fast rate, up about 45
percent in the quarter, compared with
the same quarter of 2007. Among the
biggest filings in the quarter were
those of Lehman Brothers, the failed
investment bank, and Steve & Barry’s, a
chain of discount clothing stores.
Bankruptcies among businesses are likely
to continue piling up for months, said
Michael P. Richman, chairman of the
bankruptcy practice group in the
Manhattan office of Foley & Lardner, a
law firm.
“A lot of us in the profession believe
that once we get through the Christmas
and holiday shopping season, that there
will be a literal wave of new Chapter 11
cases, largely in the retail arena,” Mr.
Richman said. “We’re going to see a
continued increase on a regular basis
for a long period of time, a period of
time that’s going to outlast the
recession, I think, for years.”
In the federal courts in New Jersey and
Connecticut, bankruptcy filings rose at
a slightly faster pace than in the two
New York City courts in the last
quarter. In New Jersey, there were 6,874
filings, up from 5,036 in the third
quarter of 2007; there were 6,696
filings in the second quarter of this
year. In Connecticut, the total number
of filings in the third quarter — 2,119
— was up 37 percent from a year before,
but was slightly lower than in the
second quarter of this year.
The Southern District handles cases from
Manhattan, the Bronx, Westchester and a
few other counties north of the city.
The Eastern District handles cases from
Brooklyn, Queens, Staten Island and Long
Island. Outside the metropolitan region,
the state is divided between the
northern and western districts, where
bankruptcy filings rose at about half
the pace of filings in the metropolitan
region.
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