Bankruptcies Up Significantly in Hampton Roads

Even though the ex-wife and her attorney do not live in the world of economic reality, objective criteria show that the local economy is reeling and more and more families and businesses are resorting to bankruptcy as a possible method of saving their homes or restructuring their businesses. Filings for personal bankruptcies in the local bankruptcy court (pictured at left) are up 23% from a year ago - a number that was already up markedly from previous years. Here are some highlights from the Virginian Pilot:

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Under pressure from mounting debts and a faltering economy, Hampton Roads residents are seeking relief in bankruptcy court in greater numbers. The volume of personal bankruptcies filed during January, February and March climbed 23 percent from the same months last year, according to the U.S. Bankruptcy Court for the Eastern District of Virginia.

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More businesses also are filing for bankruptcy. Filer, along with bankruptcy lawyers in the region, attributed the sharp rise in personal filings to the pressure of unaffordable mortgages adding to the traditional causes of bankruptcy, such as a job loss, medical bills and credit card debt. An increasing number of consumers are using bankruptcy to forestall foreclosure, Filer said.

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However, the rising job losses in Hampton Roads and number of households wrestling with mortgage payments have set off a tidal wave of bankruptcies that "has just started to come in," said Robert Roussos, a Norfolk bankruptcy lawyer. "Many people are one paycheck away from a disaster."

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Despite predictions of a possible upturn in the U.S. economy later in the year, it's likely that the volume of bankruptcies will continue climbing through the remainder of 2009, predicted Filer and local bankruptcy lawyers. That's partly because a recovery in the job market - a major influence on the pace of bankruptcy filings - tends to lag a rebound in the economy. In Hampton Roads, the number of consumers using a Chapter 7 bankruptcy, which enables individuals to liquidate most of their debt, jumped 31 percent in the first quarter. . .

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Businesses, too, are resorting to bankruptcy court as the economy loses steam. In Hampton Roads, the number that filed during the January-through-March quarter jumped 47 percent from the year-earlier period . . .

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Before turning to bankruptcy, some retailers have tried to negotiate with their landlords for a break on the rent, Roussos said. Their message to mall owners, he said, is, "If you don't reduce the rent, you'll have a vacant space." It doesn't always work. More cash-strapped businesses are choosing to liquidate in Chapter 7 rather than trying to restructure their debts under a Chapter 11 bankruptcy and continue operating. That's partly because the administrative fees are significant and financing for a business in Chapter 11 is scarce, Roussos said.