The Sacramento Bee reported today that 9,500 businesses have closed their door for good in the area,one for every six still open, and more than in 17 entire states, including Utah, Arankas, and New Mexico. What that means to the region is less sales tax revenue for the four-county region, fewer jobs, fewer shopping options, less commercial construction, plenty of thwarted dreams. The human toll is significant.According to the BEE, Sacramento has the highest proportion of closed business, while nearby Placer County ranks third.
According to Postal Service Data, as of September, the number of dormant addresses in Sacramento, Yolo, Placer and El Dorado counties had jumped more than 50 percent during the recession.
On the bright side, if there is one, commercial rents have fallen sharply as supply exceeds demand. This may be a Golden opportunity for Entrepreneurs with cash can get a deal and jump-start a new business. At the same time, its no secret that cautious and troubled banks aren’t granting many loans to launch enterprises. Many businesses and offices are stuck with rents they can’t afford, while relocation costs keep them from moving.
As consumers and companies have changed their spending patterns, the flow of money has trickled down to a standstill, especially in retail.
Statistics from the Bankruptcy Court indicate an overall 47% incease in Bankruptcy filings.
SACRAMENTO
02/01/08 – 01/31/09
02/01/09 – 01/31/10
+ / -
Chapter 7
16014
23640
47.6%
Chapter 9
1
0
-100.0%
Chapter 11
100
162
62.0%
Chapter 12
2
9
350.0%
Chapter 13
3883
5655
45.6%
Total Filings
20000
29466
47.3%
Motion
8502
9792
15.2%
Adversaries
774
799
3.2%
Closings
17742
25589
44.2%
The projected number of defaults in 2010 on mortgages is estimate to be approximately 2.5 million, according to the Department of the Treasury. And although nobody knows for sure where where the economy is going, lack of funding for small businesses is a major problem that needs to be addressed in order to stop the downward spiral. As the number of small businesses closes, unemployment will continue to be a problem, affecting everything from commercial to retail. Without easing tight credit restrictions, the trend is likely to continue.
CNN — The total number of bankruptcies filed in the third quarter surged 33% in 2009 and is at the highest level since 2005, according to data released Wednesday.
The American Bankruptcy Institute, an industry research firm, said 388,485 bankruptcies were filed during the last quarter, compared to 292,291 filed during the same period in 2008, according to data released by the Administrative Office of the U.S. Courts.
Filings for the first nine months of the year climbed 35% to 1,100,035, compared to 841,496 filings during the same period in 2008. A total of 1,117,771 bankruptcies were filed last year.
“The spike in bankruptcy filings for both consumers and businesses reflect the continuing effects of today’s weak economy,” said ABI executive director Samuel Gerdano in a statement. “With unemployment surpassing 10% and credit to businesses remaining tight, consumers and businesses are increasingly turning to the financial relief of bankruptcy.”
Bankruptcies are at the highest level since 2005, when 2,078,415 were filed before Congress passed amendments to the Bankruptcy Code, said ABI.
In October 2005, Congress implemented legislation making it more difficult for filers to prove they should be allowed to clear their debts in a Chapter 7 bankruptcy, forcing more to file under Chapter 13. The law triggered more Americans to rush to file for bankruptcy in the months before the law went into affect.
The ABI report said business bankruptcy filings rose 32% in the third quarter of 2009 to 15,177, and filings for the first nine months of the year totaled 45,510, topping the total 43,546 business bankruptcies filed in 2008.
Personal bankruptcies increased 33% to 373,308 during the last quarter, led by a 42% hike in Chapter 7 filings, which totaled 265,721. The number of consumers filing Chapter 13 bankruptcies rose 15% to 107,142 filings in the third quarter, according to ABI.
During a twelve-month period ending Sept. 30 2009, the report said total filings increased more than 34% to 1,402,816, compared to 1,042,993 in the same period of 2008.
Nevada had the highest rate per capita filings in the country, with 10.49 residents per thousand filing for bankruptcy in the year ended Sept. 30. The state also had the highest rate of filings for chapter 7 bankruptcies at 7.53.
Tennessee had the highest rate of filings for Chapter 13 bankruptcies in the 12-month period with 4.36 people per thousand.
In the Eastern District of California, filings were up 51.% over the same period from the year before: According to the clerk’s office, here are the statistics
UNITED STATES BANKRUPTCY COURT
Eastern District of California
STATISTICAL REPORT
YEAR TO DATE COMPARISON
SACRAMENTO
01/01/08 – 10/31/08
01/01/09 – 10/31/09
+ / -
Chapter 7
12661
19234
51.9%
Chapter 9
1
0
-100.0%
Chapter 11
76
136
78.9%
Chapter 12
3
7
133.3%
Chapter 13
3231
4476
38.5%
Total Filings
15972
23853
49.3%
Total filings were up 49.3%, as indicated. Significantly, Chapter 11 filings were up 78.9%, and total filings were 23,853. These statistics of course do not reflect those ineligible for Chapter 7 because of the means test, or those who were bankruptcy candidates but unable to confirm a plan because of the means test and therefore did not file.
I also got an interesting email from Mike Dillard with a Technicolor view of the recession by county
One of the frequently asked questions is that if you file bankruptcy, can you do a loan modification while awaiting discharge? The answer is yes. How you go about it may depend on whether you file a Chapter 7 or Chapter 13.
In a Chapter 7, the debtor may not be able to keep the property and make the payments unless the lender consents to a modification, because the lien survives the discharge. In a Chapter 7 case, there is no provision in the Bankruptcy Code for modifying a mortgage loan. Your case lasts about 3-1/2 to four months and so you need to reinstate the loan before the discharge is entered and the cases close. You either need to bring the loan current or work something out with the lender in between. There is no provision or program to cure the default over time, and once the discharge is entered, the automatic stay is lifted. That means that if any arrearages on the loan have not been cured by that time, the lender can proceed to foreclose on the property. The lien is not discharged in the bankruptcy, even thought the personal debt or obligation is wiped out. If you can’t bring the payments up or make arrangements with the lender during the bankruptcy, the the debtor should seek a loan modification outside bankruptcy in order stay in the house.
If you filed Chapter 13, you cannot modify a mortgage loan secured on a debtor’s primary residence under provisions of the Bankruptcy Code. However, if the lien on the house is totally unsecured, no equity protecting the lien and house is totally underwater) you can strip it off in a “cram down.” Obama said that he would sign such a bill if presented to him, but legislation that would have allowed that died in Congress earlier this year, after much outcry from people complaining that the law should not help people when most people were making their payments, and strong opposition from the Banking Industry.
In a Chapter 13, the debtor needs to get approval for any kind of modification, refinancing or sale of the property, from both the Chapter 13 Trustee and the Court. The debtor may not be able to confirm a Chapter 13 plan unless a 1st deed of trust consents to a loan modification. The question is feasibility. If the debtor’s plan does not propose to cure the default in the Chapter 13, the plan cannot be confirmed. In this case, the debtor may not be able to confirm a plan and will as a result end up losing the house. Another question is whether the loan modification would alter the debtor’s disposable income and increase the amount available to unsecured creditors. If the debtor is able to cure default, the language of Chapter 13 provides that all disposable income must be pledged into the plan. That might mean that if the debtor obtains a loan modification during the pendency of the Chapter 13 plan, both the plan payments and the plan need to be modified to reflect the change in disposable income reflecting decrease in mortgage payments.
The bottom line is that if you can’t afford the payments, contact your lender. The sooner you get started on a loan modification, the better. There have been numerous articles about the effectiveness of loan mod programs. Anyone working in the industry will tell you that it is not easy to make contact with the lenders who have been besieged with loan mod requests. At the same time, while the banks are attempting to ramp up their loan mod programs and have been adding staff, the number of loans in default is expected to increase over the next two years. Like anything, it takes persistence and consistency.
When you file bankruptcy, a fictitious legal entity is created, called the “Bankruptcy Estate.” All of your property goes to the estate, and can be liquidated by Bankruptcy Trustee for the benefit of your creditors. That’s the bad news. The good news is that you are entitled to keep whatever you can claim as “exempt.” Your exemptions vary from state to state, so one of the reasons why you need to get a bankruptcy lawyer is to make sure you keep your stuff by claiming the appropriate exemptions.
Some states, like California, have opted out of the Federal exemption systems, and under California law, you can claim exempts under two different exemption statutes found in the California Code of Civil Procedure. The property in your estate is determined at the time of filing, so if you have non-exempt assets, doing some appropriate exemption planning may be necessary. If your property is not exept, or if you fail to claim the appropriate exemptions, you may lose your stuff.
The concept of the “estate” also differs depending on which Chapter you file under. If you file a Chapter 7, your estate is determined at the time of filing; any income you earn after that is yours. If your income changes dramatically between the time of filing and the your meeting of creditors, you might face a motion to dismiss or convert your case to Chapter 13 under the theory that your filing is not in good faith.
Although, your property may be exempt, the exemption goes only to the amount of equity in the property. For that reason, until the time passes for creditors or the trustee to exemptions, you should not dispose of any of your property after filing. If you claim an exemption in a homestead, for example, you need to get the trustee’s permission before doing a short sale of the property or otherwise disposing of your house, because if the trustee or creditor objects to your exemption amount, you are going to have a problem if you transfer the property to a third party before your case is over or the time has passed to object to exemptions. When in doubt ask first. In the bankrkuptcy court its better to get permission than to seek forgiveness.
The concept of the estate also varies in Chapter 13 and Chapter 11. Unlike Chapter 7, in a Chapter 13 or Chapter 11 your income or all earnings necessary to implement the Plan are property of the estate.
Partial interests in property, such as joint interests in real estate or being a co-signer on a checking account can be deemed as property of the estate, even if it has nominal value. You need to disclose all your assets and all your debts, so even if you equitably have little or no interest in property, legally you may have an interest that is greater than you claim. That can lead to a dispute over the amount of the appropriate exemption and the extent of your interest in the property. So the moral of the story is that when in doubt disclose it to your bankruptcy lawyer. If your lawyer doesn’t know about it, he cant’ help you protect it.
