Tampa Bankruptcy Blog » Economic Crisis

Bankruptcy Filings Plummet for New York Cities

dmishesq — Wed, 14 Sep 2011 23:19:07 +0000

The number of bankruptcy filings in Buffalo and Rochester, New York fell by 20% year on year in August, marking the 15th straight month and 19th out of the last 20 months that bankruptcy figures fell. The number of new cases fell by 19.8% from 749 to 601, according to new figures from the US Bankruptcy Court for the Western District of New York, which includes courts in both Buffalo and Rochester.

Both cities recorded new 10-year lows in the number of bankruptcies in August year-on-year. Bankruptcy filings fell in Buffalo by 16.6% to 388 cases while in Rochester it dropped 25% to 213. From January 1 till August 31, there have been 3,165 new bankruptcy cases in Buffalo and 1,754 in Rochester bringing the total to 4,919 for the two cities. This number is lower than in the corresponding period last year when Buffalo recorded 3,957 cases and Rochester had 2,196 cases, totaling 6,153 bankruptcies.

The drop in the number of bankruptcies in these New York cities follows the trend nationwide. According to the American Bankruptcy Institute, the number of bankruptcies across the nation fell by 11% in August.

Experts believe a few factors have contributed to the decline in numbers of bankruptcies. Although the economy is still sluggish, the local economy has not suffered too badly. Furthermore, due to the economic crisis, lenders have tightened credit, meaning consumers have less chances of defaulting.

However, the declining numbers might also indicate another worrying factor – consumers may be so financially distressed they cannot afford the cost of filing for bankruptcy. This is particularly the case for those who have been laid off from their jobs or those who are depleting their unemployment benefits. The unemployment rate of Western New York is still 7.7%, which is on the high side. Nevertheless, it is lower than the national average that now stands at 9.3%.

Ever since the bankruptcy laws have been revamped in 2005, the cost of filing for bankruptcy has also risen.

There were 460 Chapter 7 bankruptcy filings in Buffalo (294) and Rochester (166). All these were filed by individuals, except for 14 that were filed by businesses. There were 136 Chapter 13 bankruptcy cases in the two cities, with Buffalo accounting for 90 of them and Rochester the other 46. There were 5 Chapter 11 cases, 4 in Buffalo and 1 in Rochester.

So far this year in the Western New York district, there have been 3,705 Chapter 7 cases, 1,190 Chapter 13 cases and 21 Chapter 11 cases of bankruptcy.

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Hurricane Irene-sparked Municipal Bankruptcies on the Rise?

dmishesq — Mon, 29 Aug 2011 02:17:11 +0000

The buzzword on everyone’s lips is Hurricane Irene, especially if you live on the East Coast of the United States. Lots of news, alerts and warnings are being issued on the hurricane and its movements across the eastern seaboard. As individuals and families we have to brace ourselves and take whatever precautions practically possible to face the onslaught of Hurricane Irene. But for counties and municipalities, the total cost in wreckage could pose insurmountable financial problems.

Many counties and municipalities across the US are heading towards bankruptcy because of the prolonged economic crisis. First there was the subprime mortgage crisis and now there’s the trillion-dollar budget deficit crisis, not to mention the economic woes of our European trading partners. All these spell potential financial ruin for many countries, let alone smaller regions like counties or municipalities. Despite market predictions and bond-selling strategies to raise funds, many counties and municipalities are not adequately prepared for large-scale natural disasters like Hurricane Irene.

At best, the municipalities are able to deal with the minor meteorological blips like the occasional heavy snow storm or forest fire, but generally, America’s municipalities are currently living on razor thin surpluses, if any. All it takes is one strike from a very capricious and hardly predictable mother nature to tilt the balance between financial status quo and financial bankruptcy.

For example, look at New York City situation. Not too long ago, a snowstorm last year severely drained a major portion of the city’s “reserve” budget. Now barely 9 months later, comes Hurricane Irene. It is rather obvious with New York City preparing itself to face such a potentially catastrophic disaster, it has scant financial resources to offset the damage that is coming with the city already straining to sustain present budget obligations.

This doesn’t mean that the entire eastern United States will go bankrupt, but it merely points to the fact that all counties and municipalities should take whatever financial precautions necessary to deal with natural disasters that can cost millions of dollars. For however important pension, bond and voter obligations may seem to be in the immediate present, local governments must realize their duty is not only to appease bondholders and pensioners. They are to govern their entire jurisdiction with financial prudence.

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A Successful Chapter 11 Bankruptcy

dmishesq — Mon, 13 Sep 2010 17:37:40 +0000

In the entire nation, only an estimated 25 to 30% of Chapter 11 bankruptcies are confirmed. Confirmation is the final step towards emergence from bankruptcy. The rest are either dismissed or converted into Chapter 7 bankruptcy that requires liquidation of assets to pay off debts. SARS Auto Transporters of Tucson, Arizona filed for bankruptcy protection more than 2 years ago and finally on June 30 emerged from bankruptcy.

SARS was founded in 1992 as Southwest Auto Re and 14 years later was bought over by businessmen Kent and Dale Bauman who both did not have any experience in trucking. Kent Bauman’s former employer up to that point was Intuit. He decided to stay put when the company moved his unit out of Tucson. Looking to buy a business, he eventually bought SARS after a 2 year search. But unfortunately, the economic crisis began not long after. The company’s revenue stream quickly dried up as their bills began to pile.

Having to pay for their trucks over the long term and having contracts that only paid meager sums further added to their problems. Compounding things further were the fact that other companies were failing, too. Several car-dealer clients went bust including one major used car dealer in Tucson that owed SARS $15,000 when it went bankrupt. Eventually, SARS filed for bankruptcy protection. It had 65 employees at the time.

During the bankruptcy process, SARS reduced its workforce to 40 employees while still having to pay for $200,000 in expenses – rent, fuel, insurance, payroll, truck installment payments – every month. SARS’ bankruptcy attorney, Eric Slocum Sparks, said he managed to reduce the company’s debt by millions of dollars on what he said were overvalued assets, including equipment and customer lists. The willingness of the company’s owners to use their own money to pay for expenses possibly impressed the bankruptcy judge to some extent in his decision to allow confirmation.

In the whole state of Arizona, 404 Chapter 11 cases were filed in 2008 but only 56 arrived at confirmation, according to the deputy chief clerk in the Arizona District of US bankruptcy court. SARS is considered a rare success story.

After coming out of bankruptcy, the company now operates with 15 drivers who drive 18-wheelers to move cars from one auto dealer to another or between auto dealers and auto auctions. The major cities covered are Tucson, Phoenix, Las Vegas and Los Angeles.

If your company is swamped by too much debt, you can apply for bankruptcy protection under Chapter 11 of the bankruptcy code. Soon, your company can be another successful Chapter 11 bankruptcy. Call us for a free consultation at (813) 200 4133 or visit http://tampabankruptcy.pro.

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Near Bankrupt EU Countries in Crisis

dmishesq — Wed, 01 Sep 2010 00:00:39 +0000

The Head of the European Commission, Jose Manuel Barrosso is not optimistic about the future of Spain, Portugal and Greece. In view of these countries’ enormous debt problems, Barrosso warned that unless stern measures are taken to address the problem, the repercussions may be apocalyptic. The countries might slide back to dictatorship rule and democracy will be no more. That was what Barrosso, a former Prime Minister of Portugal, revealed at an extraordinary briefing with the Trade Union Chiefs (TUC).

In the meantime, European Union (EU) chiefs have begun talks aimed at arranging for the bailout of Spain which is anticipated to run into hundreds of billions of pounds. Greece has already accepted a bailout package amounting to £650 billion. John Monks, the head of the European TUC, expressed his personal shock at Barrosso’s prediction. According to Monks, Barrosso sees no other alternative except for these countries to embrace austerity measures, however painful they might be.

If Spain, Portugal and Greece fail to adopt austerity measures, then there is a very real possibility of a takeover by the militaries which might then usher in a dictatorship. Bearing in mind the recent riots and popular uprisings in Athens and Malaga and elsewhere, a military coup is not too far-fetched a notion in these three countries. They do have a history of military uprisings and themselves only became democracies in the 1970’s.

Greece has already had its share of street protests as interest rates and taxes soared and public spending was drastically cut. Similarly, Portugal and Spain have announced austerity measures to avoid defaulting on their national debts. Likewise, other European countries that have had similar incidents of riots and protests include Hungary, Italy and Romania where public sector employees’ salaries are to be cut by 25%.

Mr Barroso’s warning exposes the concern of the EU that that the economic crisis could also lead to the collapse of the beleaguered euro and the unraveling of the EU itself.

On the other hand, Mr. Monks feels that the austerity measures themselves could push the EU back to the 1930s during the time of the Great Depression. He revealed that union chiefs throughout the EU are preparing for a coordinated ‘Day of Action’ to protest the cuts on September 29.

Meanwhile, EU leaders are meeting to discuss a rescue package for Spain. It is expected to come up to at least £100 billion to start with, although this figure could very well balloon as the economic crisis deepens.

Even huge countries can suffer financial calamities, what more ordinary citizens and companies? If you or your company are faced with financial problems, consider filing for bankruptcy. It is your right under the law to seek bankruptcy protection from your creditors. Bankruptcy gives you the chance to start anew financially. Call us at (813) 200 4133 for a free consultation or visit http://tampabankruptcy.pro.

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Greece Ready to accept EU-IMF Plan

dmishesq — Thu, 29 Jul 2010 17:37:00 +0000

Two recent opinion polls showed that most Greeks agree that the country’s government has to adopt the austerity measures imposed by the European Union (EU) and International Monetary Fund (IMF) in exchange for bailout funds to avoid national bankruptcy.

The Greek government coffers have no money to meet its obligations largely due to endemic corruption, cumbersome bureaucracy and government largesse. The country is only one week away from defaulting on bonds worth €8.5 billion maturing May 19 for which it does not have the money to pay. Despite widespread violent protests last Wednesday, a majority of the people have begun to realize that they have to bite the bullet if their country is to survive.

In a poll conducted by the Proto Thema newspaper, 54.2% of respondents say they are willing to go along with the austerity measures imposed by the EU-IMF plan rather than see their country go bankrupt. On the other hand, 33.2% of those who responded to the poll feel the government should not accede to getting outside help but should rather go it alone. The poll also shows that 51.4% of the public are reasonable enough to accept that more personal sacrifices have to be made to overcome the economic crisis while only 28% believe that having strikes will solve the problem.

Another poll was conducted by the Sunday edition of the To Vima newspaper. This poll showed similar results in more than half of Greeks (55.2%) feeling that the EU-IMF austerity measures are necessary and they will ‘accept’ or ‘probably accept’ them. 44.6% of respondents in this poll do not accept the EU-IMF conditions. However in contrast to the other poll by Proto Thema, this poll discovered 53.2% of Greeks feel that strikes and protests should continue. However, 63.5% of these respondents do not think that the protests would stop the government from adopting the austerity measures.

In the Proto Thema poll, 1,000 people were asked if they thought the Greek workers unions keep their protests at a ‘rational’ level. A whopping 74% said yes while only 21% replied in the negative. This poll was conducted on behalf of the newspaper by Alco polling agency on May 5 to 7 through telephone calls after violence in Athens by protestors resulted in the deaths of 4 bank employees whose building was set on fire.

On what they thought of their political leaders, the poll showed that 49.4% of the people felt that Prime Minister George Papandreaou has been ‘responsible’ in his job while 39.9% said he was not. In a related result from the other poll by the To Vima newspaper, 71.3% of Greeks think the country’s major political parties should cooperate more to tackle the crisis.

The To Vima survey was conducted by the Kapa Research polling agency interviewing 1,030 respondents on May 6.

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Greece Ready to accept EU-IMF Plan

dmishesq — Sat, 22 May 2010 16:14:39 +0000

The To Vima survey was conducted by the Kapa Research polling agency interviewing 1,030 respondents on May 6.

Municipal Bonds may Suffer Bankruptcy Fallout

dmishesq — Mon, 15 Feb 2010 14:14:20 +0000

In the midst of the biggest economic crisis since the Great Depression, municipalities across the country are severely affected. Already, Harrisburg (the capital of Pennsylvania) and Vallejo (California) have either seriously considered or already filed for Chapter 9 municipal bankruptcy. In the case of California’s Vallejo, a city in the San Francisco Bay area, the city municipality plans to cut back on salaries, benefits and services in an effort to reduce its debt. It has also declared that no interest would be payable on bonds for four years and general fund principle and interest payments will be suspended for three years. This would amount to a savings for the city and a loss to investors of $13.4 million.

Analysts believe that if the Vallejo’s petition for bankruptcy is approved, it would adversely affect its ratings by Fitch Ratings and set a precedent that affects bondholders. When faced with a worsening economy, it is more usual for municipalities to reduce interest rates and extend terms of repayment to bondholders rather than take the path taken by Vallejo. But it appears the long-held belief that municipalities would always honor their bond payments has to change in light of more Chapter 9 filings.

Chapter 9 filings by municipalities do not happen often. In fact, only 4 were filed in 2008 and the latest were 6 in the first 3 quarters of 2009. Since 1980, there were 227 instances with 1991 having the highest number of Chapter 9 applications with 18. Most of these did not involve cities but only special districts or utilities. States cannot file for Chapter 9 bankruptcy and 26 states even legislate that their municipalities cannot file. In these states, if a municipality wants to file for Chapter 9, it has to have a special statute in its law allowing it to do so.

In an unrelated incident, Republican US Senate candidate Carly Fiorina agreed that it would be worth it for the state of California to consider bankruptcy, apparently ignorant of states being unable to do so under federal law. At a business roundtable meeting in Colton, California, Fiorina was asked if California should consider declaring bankruptcy. She answered, “I think it should always be considered. Whether that is the right approach now, I don’t know. I think bankruptcy, as a possibility, at the very least focuses the mind on what has to be done to salvage a situation.”

In response to her gaffe, her spokesperson stated that Fiorina’s opinion was that the concept of the state not being able to pay its bills should focus everyone’s minds on how bad the financial condition of the state really was.