Sunday, January 24, 2010

Bankruptcies in New York Increase 21% in 2009

The number of New Yorkers filing bankruptcy has spiked 21 percent in the first half of 2009 -- a clear indication that the still weak job market will continue to hamper a consumer spending revival and weaken the recovery now underway.

In all, 22,014 persons throughout the state were forced to seek court-protected safety after running up too much debt -- some were forced to file after attempting for years to right their fiscal situation on their own, which shows just how stubborn this recession is.

Manhattan resident Gail S., who did not give her full name because of privacy concerns, struggled for six months before filing for Chapter 7 in March. The 37-year-old was undone by $12,000 in debt.

Chapter 7 allows debtors to wipe away unsecured debt, like that from credit cards, and differs from Chapter 13, which restructures debt and puts debtors on a repayment plan.

Changes in bankruptcy laws are not working as planned

The 2005 change in the federal bankruptcy law was aimed at making it more difficult for folks to wipe out their debts -- however, the great recession has made those moves largely irrelevant.
Of all the New Yorkers to file bankruptcy in the first half of 2009, 75 percent went Chapter 7.

"The bankruptcy law change in 2005 didn't do anything to change people's underlying financial conditions," said Bob Lawless, a professor of law at the University of Illinois College of Law and co-author of a 2008 study which found that the law change has been a failure.

National bankruptcy filings expected to reach 1.5 Million in 2009

Nationally, there has been an 82 percent jump in personal bankruptcy filings -- which experts believe will reach 1.5 million this year, a return to pre-2005 levels.

Here's what ordinary people in bankruptcy or near filing for help are coping with:

* Higher debt levels than ever before. The typical bankrupt person had total debts of $87,300 in 2007, a stunning rise from the $47,400 in debts logged back in 1981, according to the American Bankruptcy Law Journal last year.
* Flat income that cannot keep pace with debts. Median household income for bankrupt debtors was $27,100 in 2007, essentially the same as 2001 and 1991 levels.
* Higher debt-to-income ratios than ever before. As of 2007, it would take the typical bankrupt person 3.3 years to pay off all their debts -- compared to 1.4 years in 1981.
* Drawn out struggles to avoid reorganization, which translates into more fees for creditors from embattled debtors. The number of debtors waiting more than two years to file hit 43.8 percent in 2007, up from 32.6 percent in 2001 before the law changed.

Manhattan lawyer Mark Jay Heller, of Heller & Heller, said his roster of bankruptcy cases has skyrocketed 65 percent this year, but half his clients cannot afford the legal and court fees.


Thursday, January 7, 2010

New York Construction fatalities drop in 2009

Construction fatalities dropped dramatically in the city last year as a decade-long building boom came to a halt, but accidents and injuries rose, city statistics show.

There were three fatal construction accidents last year compared to 19 in 2008 - an 84% drop and the lowest rate in four years. In 2007, 12 people died in construction accidents; 18 died in 2006.

Buildings Commssioner Robert Limandri on Thursday credited the drop to stepped-up enforcement and increased oversight.

Nevertheless, the number of reported construction accidents jumped to 224 in 2009 from 151 the year before - even though new building permits were down by one-third. Reported injuries climbed to 246 from 178.

The Buildings Department said the higher accident rates were due to better reporting by contractors.

"We have been working to change the culture of the construction industry, to put public safety ahead of profit, and our message is being heard,' LiMandri said.

Two of the 2009 deaths involved workers falling, one in Manhattan and one in Brooklyn. Neither had properly used a required safety harness. The third was caused by collapse of a concrete wall in Staten Island.

In an effort to crack down on unsafe conditions, the city revised its construction codes last year for the first time in 40 years and launched a series of safety initiatives, including mandatory training for tower crane operators and tracking numbers for major contractors.


Tuesday, January 5, 2010

Chapter 7 Bankruptcy filings up 42% in 2009

Very interesting article on how despite government action in 2005 to help prevent them, chapter 7 filings continue at a record pace...

The number of Americans filing for personal bankruptcy rose by nearly a third in 2009, a surge largely driven by foreclosures and job losses.

And more people are filing for Chapter 7 bankruptcy, which liquidates assets to pay off some debts and absolves the filers of others. That is significant because a 2005 overhaul of federal bankruptcy laws aimed to encourage Chapter 13 filings, which force consumers to sign onto debt-repayment plans in exchange for keeping certain assets.

The changes were designed to make it more difficult for people to shed their debt, particularly in a Chapter 7 filling. A "means" test, for example, was introduced to separate those who could afford to repay their debt from those who couldn't. A Chapter 7 filing is off the table if the means test determines a person is able to pay back at least a portion of the debt after it is restructured.

The worst U.S. recession in a generation is testing the effectiveness of these laws. The economic downturn also has prompted more middle-class Americans to file for bankruptcy protection.
Overall, personal bankruptcy filings hit 1.41 million last year, up 32% from 2008, according to the National Bankruptcy Research Center, which compiles and analyzes bankruptcy data. It is the highest level of consumer-bankruptcy fillings since 2005. Consumers rushed to file in 2005 before the new bankruptcy laws took effect in October of that year.

Chapter 7 filings were up more than 42% as of November 2009, compared with the same period a year earlier, according to the research center. November is the most recent month with analyzed data available. Chapter 13 filings rose by 12% and made up less than a third of 2009 filings as of November.

"That suggests it was largely ineffective," Ronald Mann, a law professor at Columbia University, said of the 2005 overhaul. "I don't think anybody who's knowledgeable about the bankruptcy system thought the statute was well crafted."

During this recession, the housing crisis and high unemployment rate have prompted more people to file for bankruptcy who may never have considered the option before, experts said. Filings from 2008 showed more people with high income and high education levels resorting to bankruptcy petitions, according to an annual survey of consumer-bankruptcy filers' demographics by the Institute for Financial Literacy, a nonprofit that provides bankruptcy-related counseling and education services. Those demographic trends appeared to continue last year.

Mr. Mann said he believes bankruptcies reached their peak sometime last year, but bankruptcy attorneys from across the country said there was no sign that business was slowing. The 113,274 filings in December alone were a third higher than the same month a year earlier.

"I can't see over the top of the files on my desk," said Cathleen Moran, a bankruptcy attorney at Moran Law Group in Mountain View, Calif., likening it to the rush of clients before the revised law went into effect. In a three-month period before those rules changed in 2005, her firm filed five times as many cases as usual.

Ms. Moran's clients in 2008 typically were people who earned between $40,000 and $80,000. That changed last year when a rash of people who earned $100,000 to $300,000 began filing as well, she said.

"Expenditures that were rational when these people were working at the peak of their salary just are no longer sustainable when they lose jobs or take jobs at a third or a half of what they were making before," Ms. Moran said.

Craig W. Andresen, a Bloomington, Minn., bankruptcy attorney, handles between 20 and 30 cases a month, but said that in most years that slows to between five and 10 in December, as people use the holidays to divert themselves from their financial problems. This year he had a full load of cases through year's end.

"Everyone has said, 'Wow, I stayed busy all month.' I've never heard [bankruptcy lawyers] in December say that they're busy and don't want to take time away from their office," he said. "People are committed to filing because they don't think their finances are going to turn around."
The glut of homes and falling real-estate prices ultimately sent Kendy and Joyce Parker over the edge and to Mr. Andresen on the last day of 2009. They expect to file for bankruptcy early this year. "One way or the other we're going to have to," Mr. Parker said.

Three years ago the Parkers, who live in Minneapolis and have been married for 29 years, were living well off of Mr. Parker's contracting business. They moved into a new home in 2004 and two years later, when Mr. Parker made roughly $50,000 at his contracting company, they bought an investment property in hopes of renting it out. As the housing economy cratered, Mr. Parker saw his remodeling business shrivel.

He kept the business afloat with a $70,000 line of credit and an additional $70,000 in credit cards. Two years ago, he walked away from the business for a truck-driving job. Despite the steady income from Mr. Parker's job, bankruptcy is the only way to get out of debt. They are debating whether to file a Chapter 7 or 13 petition.

"It's not like I want to rip anybody off. We've made mistakes that didn't work and we're starting over," Mr. Parker said. "You can blame the government or you can blame banks, but...humans take risks and they make mistakes."


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