Business bankruptcies down since 1997

Although bankruptcy filings hit an all-time historic high nationally at 1,437,354 in fiscal 2001, business filings represent an ever-decreasing percentage of filings and actually are down 29 percent since 1997, according to the administrative office of the U.S. Courts.

The administrative office keeps bankruptcy filing statistics of the fiscal year which runs Sept. 30-Oct. 1. Records show that non-business and personal filings represent by far the biggest piece of the national pie in 2001 1,398,864 filings compared to 38,490 business filings.

Overall, business bankruptcies average about only 4 percent of filings in the Western District of Missouri, according to John Cisternino, chief deputy bankruptcy clerk in Kansas City.

In that district, which covers the western half of the state including Springfield and Jop-lin, statistics also are kept for the calendar year, from Jan. 1 to Dec. 31, Cisternino said.

Total bankruptcy filings in the district in 2001 were 13,834 compared to 10,902 in 2000, an increase of 2,932, or approximately 27 percent.

However, compared to five years ago, the increase is more significant.

"We've had a dramatic increase up 47 percent (district-wide) compared to 1996," said U.S. Bankruptcy Judge Arthur Federman, of Kansas City, who handles the Springfield docket. The Springfield filings in 2001 were up 56 percent since 1996, he said.

The overall 2001 numbers represent a 27 percent jump district-wide over 2000, the judge said, and in Springfield filings were up 28 percent.

In the Western District, debtors filed 1,029 petitions in December 2001, Cis-ternino said. Of those, 815 were Chapter 7 and 198 were Chapter 13.

If the bankruptcy reform bill is passed this year, clerks like Cisternino "may see a rush to the counter" for filings. Pres-ident Clinton vetoed the last reform bill that passed Congress.

Commercial bankruptcies

Businesses may file for bankruptcy protection under any chapter that applies to them, Cisternino said. Chapter 7, liquidation, is most often used by consumer debtors, many of whom have high credit card debt or large hospital bills, but it also can be used by businesses.

Local business bankruptcy attorney Ray Plaster said that since Sept. 11, he has seen more businesses opt for liquidation instead of trying to reorganize. He said his office has been flooded with clients wanting to file for Chapter 7 protection.

Federman said that there are two driving forces for escalating Chapter 7 filings: lack of health insurance, which re-sults in unpayable medical bills, and dissolution of marriage, in which families used to supporting one household must support two on the same income. Un-employment fits in there, too, he said

In the Western District, Rick Fink, the Chapter 13 trustee, said filings are up more than 39 percent over last fiscal year. That compares to the national average increase of only 8 percent. He attributed part of the growth in Chapter 13 filings to the recession, but he added that aggressive marketing of Chapter 13 filings by a new bankruptcy filing firm in St. Louis also accounts for part of the increase.

Chapter 13, which Cisternino said represents about 19 percent of overall filings, is the wage-earner's reorganization, which gives the debtor three to five years to pay off debts through a payment plan. All or a portion of the debt can be paid off within a plan that must be approved by the bankruptcy judge and the trustee.

As with any bankruptcy, an automatic stay goes into effect at the time of filing that prohibits further direct creditor contact with the debtor.

The stay forbids lawsuits or filing of liens to collect on current debts, and it prevents the accumulation of interest on debts, such as past-due taxes or judgments. A creditor can petition the court to lift the stay, but the debtor is entitled to a hearing.

Fink said Chapter 13 is best for those who are behind in mortgages or car payments, but want to keep the assets and equity. The filing often is used in foreclosure or tax-debt lien situations, he said.

Chapter 11 gives protection to businesses while they reorganize. In the Western District, Chapter 11 filings in-creased from 53 in 2000 to 67 in 2001.

Chapter 12 was for farm reorganization, but its enabling legislation expired Dec. 31, 2001. There were only four such cases filed in 2001, five in 2000.

Judge caseload high

Despite the national increase in bankruptcy filings, no bankruptcy judges have been added to the federal bench for 10 years, according to the U.S. Courts' administrative office Web site. As a re-sult, cases per judge have increased 48 percent since 1992. The average number of cases handled per judge is 4,436.

Federman, who travels to Springfield every three weeks for Wednesday and Thursday bankruptcy hearings, also has telephone hearings in Springfield once a month on a Friday for Chapter 13 cases.

He handled one-third of the cases filed about 4,600 in 2001, or almost 200 more than the national average for bankruptcy judges. Federman evenly shares the caseload with brother judges Frank Koger and Jerry Venters. Koger hears cases in Jefferson City; Venters hears cases in St. Joseph and Carthage. All three hear the Kansas City docket, too, Federman said.

"We're putting in more time than we did a year ago," said Federman, who was appointed to the federal bench in 1989. "I've been through the ups and the downs. Right now is definitely a busy time."

He said there is no legislation pending to add judges. "We're able handle it." There are many cases filed that "sail through the system without objections and in which there's no judicial involvement," Federman said.

Electronic filing of cases is mandated in bankruptcy court in the Western Dis-trict, and that has helped the judges and staff handle the growth.

"I probably spend a third of my time actually in court proceedings, the rest preparing for proceedings or writing opinions based on what happened in court," Federman said.