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Hammered, then nailed, by debt: Bankruptcy filings in Capital Region for businesses, consumers are up from 2007
(Times Union (Albany, NY) Via Acquire Media NewsEdge) Jan. 4--ALBANY -- Check out a few of the documents on file at U.S. Bankruptcy Court here and you'll start to get the picture quickly enough.
A single woman in Schenectady with annual take-home pay of $20,450 lists $25,000 in debts, more than $20,700 of it charged on credit cards.
A divorced Rensselaer County woman with three children and annual take-home pay of $26,500 owes $80,605. More than $61,700 of it stems from charges on credit cards issued by banks, department stores and clothing retailers.
You'll also find plenty of couples with incomes many would consider comfortable, who apparently were derailed financially by a failed small business or a job loss -- sometimes exacerbated by mortgage payments on a house no longer worth as much as they owe on it.
While the Capital Region still isn't feeling as much disruption as other regions of the country from mortgage foreclosures and job layoffs, the financial hammer came down plenty hard on many residents as the economy soured last year.
Bankruptcy filings in the court's Albany office hit 4,355 in 2008, up more than 21 percent from 2007's total.
Nationally, bankruptcy filings were up 30 percent in the 12 months through Sept. 30. Consumer bankruptcy filings were up more than 39 percent, according to the American Bankruptcy Institute, which tracks bankruptcy trends.
The increases in Albany include a sharp rise in Chapter 11 filings from businesses seeking court protection to continue operating while they restructure their debts.
2008 saw 29 Chapter 11 filings that included restaurants, builders and small family businesses.
In contrast, Chapter 11 filings numbered 17 in 2007 and 19 in 2006.
So-called consumer filings -- petitions from individuals whose personal financial difficulties have spiraled beyond their ability to recover -- are plentiful in the local court's caseload.
In the 11 months through November, consumer bankruptcies were already running nearly 9 percent ahead of the total for all of 2007.
"It's mostly people who have gotten over their head in credit cards," said Marc Ehrlich, a Troy attorney who represents bankruptcy clients and also acts as a trustee to oversee the liquidation of assets in bankruptcy proceedings.
More and more, he said, people "are trying to live a lifestyle using credit cards that their income doesn't justify."
Albany attorney Richard Croak estimated that his firm's bankruptcy work was up about 25 percent over 2007. He said some 400 cases were filed last year, compared with closer to 300 the year before.
A big reason, he said, has been the burden of high mortgage payments as homeowners try to stave off foreclosure.
"A lot of these people are facing this problem with these adjustable-rate mortgages," he said, and even the drop in the prime rate last month won't necessarily help them soon enough.
"A lot of these mortgages are tied to rates that are not the prime rate," he said.
Between bankruptcies and foreclosures, Randy Passonno's Collar City Auction business is surging, too.
Bankruptcy auctions tapered off early this decade to about 10 percent of the Duanesburg auctioneer's business. Now, Passonno said, it's probably closer to 25 percent, and his projections for 2009 put such auctions closer to 40 percent of his business.
Collar City will auction two grocery stores and a home in rural Franklin and St. Lawrence counties on Jan. 14 as a result of a family business bankruptcy, and is preparing to sell off inventory from an area flooring business on Jan. 17.
Passonno said he is hearing from banks, businesses and trustees across the country who need his company's services.
"I think that, over the last five years, many businesses and individuals have overextended because of the availability of credit that was out there," he said.
Recent Passonno auctions have included car dealerships in Kingston and on Long Island.
Passonno and others close to the bankruptcy scene say the signs are strong that this year will be even tougher.
"We expect a big 2009," said Croak, the Albany bankruptcy attorney. "It's a terrible thing, and I don't see any end in sight."
Cathy Woodruff can be reached at 454-5093 or by e-mail at cwoodruff@timesunion.com.
Rising cases
More people and businesses filed petitions in U.S. Bankruptcy Court in Albany through November 2008 than during all of 2007.
Chapter 7(nb)--7(b)--11 12(farms) 13(nb)--13(B)--Total
2008*--2,578 61 25 5 1,224 19 4,012
2007 2,209 40 17 1 1,292 25 3,584
2006 2,190 53 19 1 1,240 30 3,533
2005 7,762 77 29 2 2,534 23 10,427
2004 5,673 61 23 0 2,435 36 8,228
2003 6,149 93 38 10 2,183 31 8,504
2002 6,061 64 20 5 2,051 29 8,231
2001 6,203 118 25 5 1,683 32 8,067
2000 5,331 108 32 8 1,434 42 6,956
--NB = non-business; B = business
*--Through November; December chapter totals not yet available. 2008 year-end case total was 4,355.
Source: U.S. Bankruptcy Court
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Copyright (c) 2009, Albany Times Union, N.Y.
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