Cathleen Allison/Nevada Appeal
Friday, May 20, 2011 | 6:20 p.m.
- State budget windfall could prevent School District layoffs
- $274 million in new revenue softens state budget cuts
- Economists predict static housing market this year
- Economic Forum has spoken; tough choices come next
- Business panel sets state spending at $5.3 billion
- John Restrepo: Economic recovery hinges on job growth
- How did so many experts get their forecasts so wrong?
The economist who helps predict how much money state government can expect to fund its budget has declared personal bankruptcy, telling the Sun he didn't foresee his own financial meltdown.
John M. Restrepo, chairman of the five-member State Economic Forum, filed for bankruptcy protection in November, citing $905,000 in debt and $360,000 in assets.
In the wake of his filing, Restrepo had to complete an Internet course on personal financial management offered by a nonprofit consumer credit counseling agency.
Restrepo's bankruptcy, triggered by the collapse of his Las Vegas consulting business, symbolizes the depth of the recession in Southern Nevada, which has hit blue-collar and white-collar workers alike and has also struck the state's government and corporate elite.
"I guess like all of us, who could have predicted the depth of this recession?" Restrepo said Friday. "We knew there was (an economic) correction coming. I saved some money for a recession but not for the depth of this depression in Southern Nevada and the impact it had on our clients and our company. I tried to do the best I can to continue to pay off all of the smaller local vendors I can."
Despite his personal bankruptcy, Restrepo's company, Restrepo Consulting Group LLC, remains in operation and continues to produce economic forecasts and market studies for state and local governments as well as developers and casino operators. He said demand for consultants declined with the recession as his two main clients during his 22 years in Southern Nevada -- government and the development industry -- no longer needed his services.
"Our revenues were dramatically impacted because those firms haven't used us anymore because nothing's being developed, and the budget cuts of state and local governments have cut back dramatically on the use of consultants," Restrepo said.
He reported average monthly income of $3,505.88, according to the November court filing. His spouse, Elvira Gaensslen, lists her occupation for the past three years as a real estate agent. She reported average monthly income of $4,468.95 for a combined monthly total of $7,974.83 for the couple. They reported average monthly expenses of $8,007.57.
The couple walked away from their 2,522-square-foot home on Via Delores Avenue in Las Vegas, which they purchased for $399,900 in 2007, according to the Clark County Assessor's office. The current value of the couple's interest in the house was listed at $225,000 against a secured claim of $379,500 held by Bank of America, according to the bankruptcy filing.
Restrepo listed debts of $36,972.52 for an American Express business credit card; $27,864.21 for a Chase Visa business credit card; $24,277.55 to Chicago Title Agency, NV Inc. for office rent; $7,163.52 to Office Equipment Finance Services for a copier lease; $121,427.76 on a business loan from SMS Financial; and $225,000 on a note held by his ex-wife and business partner, Nancy Schult, who owned 49 percent of Restrepo Consulting. He is in the process of buying out her share of the company and continues to make spousal support payments.
Restrepo first realized about a year ago that he might have to file for bankruptcy. He tapped into his personal savings and retirement funds to pay employees, depleting both as he hoped the economy would rebound before he was forced to lay off employees. At the height of the economy he had as many as eight employees. Now he has one half-time employee in addition to paying multiple freelance consultants.
Individuals and businesses can file for Chapter 7 bankruptcy protection, as Restrepo did, which provides a fresh financial start for individuals, although not all debt is wiped off the books. Debt for certain taxes, fraudulently incurred credit card debt, child support and alimony and most student loans must still be repaid. The bankruptcy law that took effect in October 2005 limits Chapter 7 as an option for many Americans: those deemed by a "means test" to have at least $100 a month left over after paying certain debts and expenses will have to file a 5-year repayment plan under the more restrictive Chapter 13.
Nevada led the nation in personal bankruptcy filings with 10.8 per 1,000 people during the 12 months ended March 31, according to U.S. Bankruptcy Court figures. Georgia was second with 8.9 filings per every 1,000. Most business and nonbusiness bankruptcies in the 12 months ended March 31 were Chapter 7 liquidations, according to the court.
Terms of the bankruptcy resolution required Restrepo to undergo debt counseling, which he received from Consumer Credit Counseling Services of Southern Nevada, according to the court filing. In December, he received a certificate of debtor education for completing a Internet course on personal financial management offered by Consumer Credit Counseling Service of Nevada and Utah.
"In a really weird way (bankruptcy has) given me a deep appreciation of what many small businesses have gone through considering the depth and breadth of this recession," said Restrepo, noting that his company has not missed any payments to local vendors and subcontractors. "Understanding the struggles of these small businesses has helped me understand what it's going to take for these small businesses to recover. It's really related to small business job growth. That's all folded into my forecasting."
Sun researcher Rebecca Clifford-Cruz contributed to this report.