Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: WEDNESDAY, January 15, 1992 TAG: 9201150121
SECTION: BUSINESS PAGE: A-1 EDITION: METRO
SOURCE: GEORGE KEGLEY BUSINESS EDITOR
DATELINE: LENGTH: Medium
BUSINESS FAILURES INCREASE
He was in the homebuilding and remodeling business for 19 years until a divorce settlement drove him into bankruptcy.He was ordered to pay $3,500 a month to support his former wife and four children. That forced him to sell his small contracting company in Roanoke and seek court protection from creditors. He came back to the improvement business "but things have slowed to a crawl . . . I'm getting only one or two jobs a month," he said Tuesday.
The man, who spoke on the condition that he not be identified, is part of the statistics that tell last year's dramatic rise in business bankruptcies in Western Virginia. His company was one of 779 that petitioned the Western District Bankruptcy Court in 1991, reaching a record level, 34 percent ahead of 1990. The court on Tuesday released its analysis of 1991's filings.
The harsh grip of the recession has pushed bankruptcies to high numbers across the country. The Dun & Bradstreet Corp. reported a 46 percent jump in U.S. business failures through the end of 1991.
And last year marked the seventh straight yearly increase in individual and business filings for the Roanoke, Lynchburg and Harrisonburg bankrukptcy court offices, said John W. L. Craig, district court clerk.
Business petitions filed in the court's Roanoke division rose 32 percent and the number of filings - including those from individuals as well as companies - was up 30 percent. The record 468 business petitions filed in Roanoke represented an increase of more than 30 over 1982, the last major recession year.
Craig's figures show that 87.8 percent of all cases in the district last year were for liquidation, the federal code's Chapter 7. Another 10.6 percent were for wage-earner plans under Chapter 13. Only 1.6 percent of the cases were for reorganization by companies proposing to stay in business after resolving financial problems.
While the statistics represent companies going out of business, bankruptcy itself is a growth industry in the district. Five secretarial positions were added to Craig's three offices last year and seven more have been allocated for 1992. He has more than 80 applications on file for the jobs.
The Bankruptcy Court also is taking more space, soon to occupy two other offices to fill the entire second floor of downtown Roanoke's Commonwealth Building. "If the economy keeps on as it is, we may need the entire building," said Diana Woods, the court's chief deputy clerk.
A. Carter "Chip" Magee, a Roanoke lawyer who works on bankruptcy cases, said his firm's load is up 25 percent over 1990 - ahead of 1982, the previous recession year, and the most he's seen since 1979, when he began handling bankruptcy cases.
Many bankruptcies stem from plant layoffs, large medical bills and frequent credit card use, Magee said. "Until that cycle is broken, we'll see more in 1992," he predicted.
The number of cases referred from the Legal Aid Society is down. Apparently many people are too poor to file, Magee said.
In Washington, the American Bankruptcy Institute said in December the nation "is well on its way to a record 1 million bankruptcies in 1991." Through last year's first nine months, total petitions were up to 918,988 in the nation, 22.5 percent ahead of the preceding year.
The rising level of filings "is quickly creating a bankruptcy crisis," the institute said. Courts are "dangerously overloaded," and the increased number of filings will result in additional burdens on already strained lenders, a tightening of credit for borrowers, and a rise in legal costs for complex cases, said L. Edward Creel, vice chairman of the institute and a Dallas lawyer.
In the most recent breakdown of figures by states, Virginia's business bankruptcies were running 51.6 percent ahead through the first seven months of last year compared with the same period of 1990, according to Dina Silva-Decker of Dun & Bradstreet. This was close to the national increase of 51.5 percent in the same periods.
Recession has hit almost every industry, starting in the Northeast, extending through the mid-Atlantic states and now spreading to the West Coast, Silva-Decker said.