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Sheila Collins: Lack of demand from builders forced her to sell.
Sheila Collins: Lack of demand from builders forced her to sell.

Bankruptcy filings start another climb

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The company now operating as The Granite Source of Missouri LLC has been stung by bankruptcy more than once in its lifetime.

The assets of the company, founded by Scott and Tracy Hardwick in 1999 as Springfield Granite, were sold to Sheila Collins in December 2006, while amid a bankruptcy reorganization plan.

Now Collins, who changed the name to Springfield Granite-Plus, also has had to go the bankruptcy route. She filed Chapter 7 personal bankruptcy in June after selling the assets of the business, now operating as The Granite Source of Missouri, back to the Hardwicks in February.

Collins is among a steady stream of bankruptcy filers propelled by this economy. Annual figures for the Springfield district of the U.S. Bankruptcy Court for the Western District of Missouri show total filings in 2008 were up nearly 29 percent compared to 2007, and up 83 percent since 2006.

Through May this year, bankruptcies in the Springfield district are up 20 percent to 1,212 filings compared to the first five months in 2008.

Personal takedown

Collins seemed to be riding high.

She was one of the finalists for Springfield Business Journal's 2008 Economic Impact Awards' Entrepreneur of the Year, and her company was named 2008 Supplier of the Year by the Home Builders Association of Greater Springfield.

But citing the slowdown in construction market, Collins said she had no choice but to file for bankruptcy. While she was mum on specific details of the bankruptcy filing - she said she's scheduled to meet with a trustee at the end of the month - the cause of her situation is a familiar strain in business circles: not enough business.

"The construction industry is in such turmoil, and although I did a lot of research on it and it seemed like the business was going to work, the overall level of residential construction has dried up," Collins said. "It's an odd situation. We felt like things were going in the right direction, but just not fast enough, soon enough."

Ted Tinsman, a bankruptcy attorney with Springfield-based Smith, Montgomery & Associates Attorneys at Law, has seen several cases similar to Collins', and he points to reasons that aren't directly tied to the recession.

"A lot of people are using personal credit for the business when the business is not viable," Tinsman said. "When I do a case for someone who has closed their doors, there's usually personal debt fallout where they've used their personal credit to fund business activities. That's not just with this recession - that's the No. 1 mistake I see people make."

Collins' personal bankruptcy filing cites "primarily business debts" of more than $1 million with assets between $100,000 and $500,000. Still, she remains confident that her personal connection to her work and her community will see her through what she calls a "long and complex" bankruptcy process.

"I will stay in Springfield - I'm a big believer in this community. It's just a matter of figuring out what's next and trying to make sure I follow the rules of bankruptcy," she said.

"It's not an education I intended to get."

Declining confidence

Springfield bankruptcy attorney Gary Bishop of Mann, Walter, Bishop & Sherman PC cited dropping confidence levels among businesspeople also as a factor in the rise of bankruptcy filings.

"It has to do with the liquidity of investments and the turnaround time people can expect to see a profit from their outlay of capital. I think people were accustomed to that being quick," Bishop said. "The average (speculative) house builder, for example, was used to that home turning around rapidly, and now that's no longer true."

Bishop also noted that the increase in bankruptcy filings is more noticeable, at least in his office, among businesses than among individuals.

"I have not seen bankruptcy filings so far - and I view this as a good thing - spike among individuals for whatever reason," Bishop said. "People are filing, but it's been fairly consistent throughout this whole downturn."

Tinsman said he has seen an increase in clients who are forced to file Chapter 7 bankruptcy - meaning liquidation of assets to pay secured creditors. Chapter 7 liquidation filings in 2008 were up 33 percent compared to 2007 in the Springfield division.

"The high unemployment levels mean loss of income, making it so that people already in bankruptcy are unable to make the payments under their reorganization plan," Tinsman said, referring to the plans debtors follow when filing for Chapter 11 or Chapter 13 bankruptcy.

Scott Hardwick, who filed Chapter 11 bankruptcy reorganization for his Springfield Granite business in 2005, did not return calls seeking comment for this story.

The increase in bankruptcies in recent years seems to undo some of the reduction in filings created by bankruptcy reform that took effect in August 2005.

Total filings in Springfield are still down nearly 40 percent from their peak in 2005, when the Bush administration enacted the Bankruptcy Abuse Prevention and Consumer Protection Act.

The reforms made it harder for individuals and businesses to file Chapter 7 bankruptcy, pushing them toward reorganization under chapters 11 or 13. Those filings now make up nearly 20 percent of the total in Springfield, compared to less than 10 percent four years ago.[[In-content Ad]]

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