Bankruptcies leap 134% in first six months
July 10th, 2008, 5:00 am · 6 Comments · posted by Jan Norman, small-business columnist
Bankruptcies filed in the region that includes Orange County totaled 27,410, a 134% increase in the first six months of 2008, compared to the same period a year ago.
That’s according to AACER, an Oklahoma City bankruptcy data and management company that gathers information from all federal bankruptcy courts in the United States.
The spike reflects the expanding financial woes that started in the mortgage and housing industries, tighter credit standards and high fuel and food prices.
“We’re busier than we have been in many, many years,” said Costa Mesa bankruptcy attorney Evan Smiley, a partner at Weiland, Golden, Smiley, Wang, Ekvall & Strok. “It very much related to real estate and the cost of energy, which affects everything we buy from groceries to fuel for cars.”
In June alone, 5,347 bankruptcies, double from a year earlier, were filed in the Central District Court of California that encompasses Orange, Los Angeles, Riverside, San Bernardino, Ventura, Santa Barbara and San Luis Obisbo counties.
More than 90 percent - 25,083 - of the filings in first six months were consumer bankruptcies, while 2,327 were business bankruptcies. The central district accounts for almost half the bankruptcies in California, ranking the state first nationally in the percentage increase in monthly filings. However, the state’s per capital filings rank only 21st.
“It’s a sizable increase year over year,” said Mike Bickford, chief manager of AACER, short for Automated Access to Court Electronic Records. “In the past we have seen (bankruptcies) stay fairly level in the summer and then spike in the fall.”
Nationally, more than half a million bankruptcies were filed in the first six months, causing Bickford to say that total 2008 filings could exceed 1.1 million, compared to 800,000 in 2007.
The business bankruptcies cut across most industries. In economic downturns, bankruptcies weed out inefficient and weak businesses, observed William Dunkelberg, chief economist for the National Federation of Independent Business.
More bankruptcies are likely as many businesses struggle. In the most recent monthly report on small-business economics, NFIB reported that owners’ expectations for real sales gains and improvements in business conditions are as bad as in 1980-82, the worst recession period in recent years.
OTHER STORIES:
- Bankrupt small businesses still burdened by tax debt
- Mortgage woes = business bankruptcies?
- Almost half of small businesses are cutting payroll
- Small business outlook on economy sours
- O.C. businesses much more affordable than homes
July 10th, 2008 at 9:43 am
The surge in personal bankruptcies is certain to have an effect on businesses since those consumers have gone from buying now to not buying since they no longer have credit cards to use.
As bankruptcies increase lenders tighten credit as they write off or defer payment on debts. Lending less and big write offs will not only effect consumers but business as well. And earnings reports will weaken the stock price.
It would be interesting to know how business bankruptcies compare 2008, 2007 year to date and overall the class of bankruptcy since many business seem to survive the stigma of bankruptcy.
July 10th, 2008 at 2:10 pm
more signs of a recession
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