Nationwide Bankruptcies Up

August 28, 2008

It may not make you feel better while pumping gas, but another sign of Houston’s economic strength can be found in that barometer of financial weakness: bankruptcies.

The Houston Chronicle reports, while the rest of the country is experiencing a nearly one-third increase in personal and business bankruptcies, Houston’s numbers remain stable.

Nationwide, the number of bankruptcies nearly reached 1 million for the 12-month period ending June 30, 2008, the U.S. Courts office announced Wednesday. The 967,831 personal and business bankruptcies represent a 28.9 percent increase over the year ending in June 2007.

In the U.S. Courts for the Southern District of Texas, the federal division that includes Houston, Galveston, Laredo and the Rio Grande Valley, the case filings haven’t changed significantly, however.

“Ours are kind of a flat line, about 1,000 a month,” said David Bradley, chief deputy clerk for the Houston area district.

By some measures, there even is a dip in the personal bankruptcy filings in the federal district that includes Houston.

U.S. Courts statistics for the district show that while business bankruptcies in the first quarter of 2008 inched up to 168 from 155 in the same period in 2007, personal bankruptcies dropped from 2,927 in 2007 to 2,764 in the first quarter of 2008.

Overall, in the first six months of 2008, there were 6,299 bankruptcies filed in the Houston district. That was about 5 percent fewer than the 6,658 cases filed in the last six months of 2007.

“Occasionally, it happens that you have a district that will be at odds with the national trend,” said Jack Williams, resident scholar at the education and research group the American Bankruptcy Institute in Alexandria, Va. “It may be an anomaly, but your local industry still depends on the energy sector and sectors tied with it and they have done reasonably well.”

Williams said by the end of the year there could be 1.2 million personal and business bankruptcies filed nationwide, compared with 800,000 in 2007. He expects it to get worse.

“It’s a bad sign that Chapter 13s are down. That’s the bankruptcy where you have a plan to pay some money back over three or five years. And Chapter 7s are up. That’s where there is no such plan,” he said.

Lydia Protopapas, a Houston bankruptcy lawyer who works for the national firm Weil, Gotshal & Manges, said there has been a deluge of work for her firm in the last six months, but most of it is outside the Houston area.

“We’ve seen distress in a lot of different industries and, in particular, in retail and home building,” she said.

Protopapas said companies that file for bankruptcy can choose where to file, especially if they have assets nationwide. She said Houston area courts may lose out to Delaware and New York, where judges have developed special expertise.

Johnie Patterson, a Houston lawyer who represents consumers in bankruptcy, said he assumes the nationwide trend is driven in part by home foreclosures.

“But our housing market is not nearly so bad,” he said. “Oil prices are so high and we have so much oil money that it insulates us.”

 

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