THE ECONOMY:

Cacophony of S.O.S. calls

Bankruptcy filings jumped in 2008, and experts see no letup this year

Steve Marcus

Lenard Schwartzer, a U.S. bankruptcy trustee, says filings began to surge in midsummer and are likely to continue at a high rate for at least six months.

By Jeff German (contact)

Saturday, Jan. 17, 2009 | 2 a.m.

United States Bankruptcy Court: District of Nevada

Another staggering statistic arrived this week, another measure of just how hard the recession hit the Las Vegas Valley in 2008. And this figure also serves as a warning of even worse times in 2009.

Las Vegas bankruptcy filings jumped 73 percent last year — 15,790 in 2008 compared with 9,114 in 2007, according to U.S. Bankruptcy Court officials.

The numbers and the factors fueling them have experts predicting a continued upward trend for this year.

“I don’t see any letup,” said veteran U.S. Bankruptcy Trustee Lenard Schwartzer who, along with his fellow trustees, has been swamped with cases for months. “I think it’s going to be bad for at least another six months.”

It could be a lot longer than that, though, according to Samuel Gerdano, executive director of the American Bankruptcy Institute, an independent research center based in Alexandria, Va.

“Bankruptcy happens at the back end of economic problems,” he explained. “Today’s numbers, as bad as they are, reflect the economic realities of nine to 12 months ago.”

By most accounts, the economy has worsened since midsummer, when the latest surge in local bankruptcies began, according to Schwartzer.

The Clark County bankruptcy filers also no longer fit the stereotype. Time was when they were primarily people who had long lived paycheck to paycheck, but that’s no longer true.

“Today, it’s people driving Bentleys and living in gated communities who have overextended their credit,” longtime bankruptcy attorney James Patrick Shea said. “You see more people with higher incomes in Bankruptcy Court.”

Shea, a member of the American Bankruptcy Institute’s executive committee, said many people here wound up in bankruptcy after they bought property in the once rapidly escalating real estate market that collapsed.

“People were living beyond their means,” he said. “They were either unrealistic or overly optimistic about the market.”

Even well-known Las Vegans aren’t immune from the bankruptcy blues.

One day last week, for example, three local media personalities all had proceedings in Bankruptcy Court.

Lawyers for Fox 5 morning television anchor Monica Jackson and her husband were in court for a hearing on a motion by Bankruptcy Court Trustee Rick Yarnall to toss out the couple’s Chapter 13 debt reorganization case because of their alleged failure to abide by a payment plan.

Radio and television personality Lark Williams had a pretrial conference as part of an effort by Wells Fargo Bank to recover credit card debt stemming from her Chapter 7 petition.

And former television weatherman Mark Pfister was looking for approval for his Chapter 13 repayment plan.

Nevada’s high unemployment and foreclosure rates and the national credit crunch have contributed to the larger number of bankruptcies here, according to UNLV economist Keith Schwer, director of the university’s Center for Business and Economic Research.

“It’s driven by economics — the loss of jobs, the loss of the value of assets and the inability to borrow money,” he said. “Not being able to borrow closes out an option for people to readjust and get themselves out of trouble.”

Gerdano shared that view.

“Until a year ago, homeowners could rely on home equity to backstop a short-term emergency, but they can’t do that now,” he said. “Using a home as an ATM machine is no longer an option.”

The vast majority of bankruptcy cases, experts say, are filed by consumers, but a growing number of businesses also have sought relief in court.

In Las Vegas last year, the largest category of filings was Chapter 7, which allows an individual or a business to discharge the brunt of their debts. New Chapter 7 cases more than doubled from 5,281 in 2007 to 10,581 in 2008, Bankruptcy Court officials reported.

The number of Chapter 13 filings, which allow consumers to devise a plan to pay their creditors, rose from 3,751 in 2007 to 5,072 last year.

And court officials said there were 136 new Chapter 11 cases in 2008, compared with 82 in 2007. Chapter 11 allows a slumping business to reorganize its debts.

Statewide bankruptcy filings rose by 69 percent, with a total of 18,392 cases in 2008 compared with 10,884 in 2007, officials said.

The increases in Nevada are much sharper than national trends, according to figures released earlier this month by the American Bankruptcy Institute. The organization reported that consumer bankruptcies nationwide rose by nearly 33 percent in 2008. Across the country, there were 1.1 million new filings in 2008 compared with 801,840 in 2007.

Statistics compiled by the Administrative Office of the U.S. Courts in Washington show that Nevada ranked second in the nation last year, behind Tennessee, in per capita bankruptcy filings through Sept. 30. For every 1,000 people, there were 6.39 new cases during that period. Nevada ranked first in Chapter 7 bankruptcy filings and seventh in new Chapter 13 cases.

Jeff German is the Sun’s senior investigative reporter.

Discussion: 12 comments so far…

By rachelmac

1/17/09 at 2:20 a.m.

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73% increase. That is too bad. But there are ways to get help to prevent bankrupcty, and help in the process if you do need to file. I found this site to have some info. www.needhelppayingbills.com/html/help_wi...
By renomuse

1/17/09 at 2:37 a.m.

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Well, Harry Reid and friends made sure their credit card company friends got whatever they wanted in that last bankruptcy bill. Always, always, it's about the corporations.
By bdover

1/17/09 at 4:05 a.m.

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We may be broke, but we're safe. Here in Henderson, we've got a cop on every corner, and the new chief wants more money by raising the sales tax. Guess we'll have a cop guarding every donut shop?

George Bush kept us safe-and broke, too.

At least on Jan 20, we'll be able to echo the immortal words of that esteemed Republican scholar, Gerald Ford:

"Ladies and gentlemen, our long national nightmare is over."
By johnevegas

1/17/09 at 6:19 a.m.

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renomuse "Always, always, it's about the corporations."

I used to feel exactly the same way. Then I became an entrepreneur and employed people. Now it seems to me that it is always about the employees.

My point is that no matter what you might think or say about corporations, they are essentially comprised of people like you and me. Therefore unpaid credit card bills jeopardize the people who make up the credit card companies, and the people who own stock in those companies. Foreclosures, obviously, are exactly the same.

I think when you paint the "enemy" as a nameless faceless soulless entity, you skew the truth and make it appear as something it is not.

If you try to remember that you are, mostly, talking about individuals like yourself, it helps to give a clearer view of why people like Harry Reid might be motivated to help lenders through legislation, other than that he is just helping his "corporate friends". And so on...
By Teaser

1/17/09 at 7:57 a.m.

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I think when you paint the "enemy" as a nameless faceless soulless entity, you skew the truth and make it appear as something it is not
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The problem here is that when it comes to gaining a variety of political favors, avoiding nasty legal actions, etc., many corporations are more than happy to suddenly become and act like these "nameless, faceless, soulless entities." I'm not saying all corporations are bad or corrupt. But be honest - there are plenty who prioritize profit over people. That is soulless.
By CactusJack

1/17/09 at 8:15 a.m.

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"I think when you paint the "enemy" as a nameless faceless soulless entity, you skew the truth and make it appear as something it is not."

You mean, like, the government?

Bankruptcy laws were changed during Republican control of Congress.
By johnevegas

1/17/09 at 10:25 a.m.

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"But be honest - there are plenty who prioritize profit over people. That is soulless."

I know it seems that way, and I'm not saying that there are no corporations that do not take advantage. However, until you have had shareholders calling you names for everything you do, and banks demanding constant justifications for your utterly complex finances, and the SEC watching everything you say and do, and taxes and customers and quality and growth and the economy and politics and health plans and the competition and the ever changing markets and ever changing technology and security and disaster recovery and vendors, it's hard to understand that perspective.

Of course when you overlook all that and pretend those things don't exist, than ya, it seems soulless and all about profits.

You give that a shot some time. See how popular you are. No matter WHAT you do! Ask Bill Gates!
By hal0bender

1/17/09 at 10:40 a.m.

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Harry Reid, complicit in the looting of taxpayer monies over the past few months, needs to be removed from office. He is a traitor to the American people and beholden only to his corporate and mob masters. Him and Pelosi, coupled with the idiot in the white house, have been nothing short of a disaster for the country.

Real change is not voting for either democrats or republicans but third party candidates.
By jfnance32

1/17/09 at 12:19 p.m.

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The last bankruptcy bill had Biden as the lead Democratic cheerleader for it.

His son work for a lobby firm on the promoting the bill. His son made millions in lobbying fees for his firm on that bill.

Our hero....Biden.

P.S. Reid has family in DC that make millions in salary each year working for DC lobbying firms.

Being a Senator is a nice gig if you can get it.
By inquisitive

1/17/09 at 11:36 p.m.

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Of those who filed bankruptcy in 2008 in Las Vegas, how many were suckered and actually did not need to file for bankruptcy?

Section 21.090 of the Nevada Revised Statutes has some very liberal exemptions from judgments.
By Trogdor

5/2/09 at 7:41 a.m.

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Inquisitive
"Of those who filed bankruptcy in 2008 in Las Vegas, how many were suckered and actually did not need to file for bankruptcy?"

You hit the nail on the head. No question that a combination of media hype, market downturn, and fear have spiked the amount of people being encouraged by opportunist legas council to file. What makes it worse is in many cases the attorneys themselves are misrepresenting their expertise and taking money from clients hoping their ineptness will be glossed over by the need of expediency in the courts.
http://honestattorneys.blogspot.com