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Bankruptcy filings down in 2011

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Throughout Indiana, bankruptcy filings fell last year as compared to 2010 – filings in the Indianapolis area fell 17 percent last year, more than in the nation as a whole – but attorneys don’t see an improving economy in those figures.

They say the decline was driven more by stalled foreclosure proceedings.

“The drop in mortgage foreclosures and sales definitely impacted filings,” said John Petr, an attorney at Kroger Gardis & Regas and a Chapter 7 trustee for the U.S. Bankruptcy Court for the Southern District of Indiana. “That deadline to stay in the home wasn’t there.”

There were 22,754 cases filed in the Southern District in 2011, compared with 27,394 the prior year. The district encompasses the southern two-thirds of the state and has offices in Terre Haute, New Albany and Indianapolis, where most of the cases were filed.

The caseload dipped below the 2008 level but remained higher than 2007, the last year before the recession, when 18,733 cases were filed.

It appears the number of filings has also declined in the northern part of the state. Through November 2011, 14,483 cases were filed in the Northern District of Indiana – which has divisions in Fort Wayne, Hammond and South Bend. In 2010, the Northern District had 18,286 case filings, according to its website. December figures weren’t available from the Northern District as of IL deadline.

Nationwide, bankruptcy filings declined 12 percent, to 1.38 million, the American Bankruptcy Institute in Alexandria, Va., reported.
bankruptcy
Banks halted foreclosures last year after they were caught processing earlier cases illegally – the so-called “robo-signing” controversy. The still-depressed housing market is an added incentive for banks to hold off on foreclosures, instead of adding more vacant houses to their portfolios.

Attorneys said they expect filings to rise this year, as banks start to push through foreclosures again.

“The pipeline of cases I have is probably bigger than it’s ever been,” Noblesville-based bankruptcy attorney Jonathan Brown said.

Mark Zuckerberg, who has the largest personal bankruptcy practice in Indiana, thinks attorneys will begin to see consumers who walked away from houses that are worth less than the outstanding debt. Even after selling an “underwater” house, banks want to collect the difference from someone, Zuckerberg said.

He thinks many Hoosiers are avoiding bankruptcy because they’ve given up hope. With no jobs or savings, they see no assets worth protecting when creditors come knocking.

“You ever heard the phrase, ‘You can’t get blood from a turnip?’” Zuckerberg said. “A lot of these people are turnips, and there’s nothing that can be done to them.”

Another factor in the decline is a reduction in household debt, said Samuel Gerdano, executive director of the American Bankruptcy Institute. He said consumers are spending less and have less access to credit.

The most common form of bankruptcy filing is Chapter 7, which is used by both consumers and business owners to erase debt and start fresh, followed by Chapter 13, in which a debtor sets up a repayment plan.

Large businesses typically reorganize under Chapter 11.

Nationally, business filings fell further than consumer filings, the American Bankruptcy Institute said. Using data provided by Epiq Systems Inc., ABI reported a 19-percent decline in business filings, which included both Chapter 11 and Chapter 7, versus an 11-percent drop for consumers.

Data from the Southern District of Indiana showed a similar trend. There were 84 Chapter 11 filings last year, down 26 percent from 115 in 2010. In 2010, the Northern District reported 64 Chapter 11 filings; through November 2011, there were just 30.

Henry Efroymson, chairman of the bankruptcy practice group at Ice Miller, said many of his business clients are beginning to see better times after suffering since 2007.

Another factor, he said, is, “There is a lot of forbearance activity going on,” as lenders hope they’ll be repaid once the economy improves.

Jim Carlberg, chairman of the Bankruptcy and Creditors’ Rights Group at Bose McKinney & Evans, doesn’t think the economy is improving fast enough to help most businesses.

After three years of dealing with commercial real estate, he expects to see other types of businesses in court this year.

“I think it could run the gamut of retail, manufacturing, distribution, everything other than real estate,” Carlberg said.

Many small businesses that were vulnerable to the recession succumbed to Chapter 7 in 2009 or 2010, which partly explains the decline last year, Petr said.

Even in a thriving economy, bankruptcy is a steady practice because the “big three” — divorce, medical bills and unemployment — never disappear, said Brown, the Noblesville bankruptcy attorney.

Medical bills were what tripped up a McCordsville couple Brown represented at a creditors’ hearing this month. Though the couple, who did not want to be named, had a pension, medical benefits and part-time jobs, they underwent surgeries with huge out-of-pocket expenses.

The problem compounded because they paid the bills with high-interest credit cards, the husband said. “We’ve always paid the minimum amount. We just got into a rut.”•

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This story originally ran in the Jan. 16-22, 2012, issue of Indianapolis Business Journal.
 

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  1. I have been on this program while on parole from 2011-2013. No person should be forced mentally to share private details of their personal life with total strangers. Also giving permission for a mental therapist to report to your parole agent that your not participating in group therapy because you don't have the financial mean to be in the group therapy. I was personally singled out and sent back three times for not having money and also sent back within the six month when you aren't to be sent according to state law. I will work to het this INSOMM's removed from this state. I also had twelve or thirteen parole agents with a fifteen month period. Thanks for your time.

  2. Our nation produces very few jurists of the caliber of Justice DOUGLAS and his peers these days. Here is that great civil libertarian, who recognized government as both a blessing and, when corrupted by ideological interests, a curse: "Once the investigator has only the conscience of government as a guide, the conscience can become ‘ravenous,’ as Cromwell, bent on destroying Thomas More, said in Bolt, A Man For All Seasons (1960), p. 120. The First Amendment mirrors many episodes where men, harried and harassed by government, sought refuge in their conscience, as these lines of Thomas More show: ‘MORE: And when we stand before God, and you are sent to Paradise for doing according to your conscience, *575 and I am damned for not doing according to mine, will you come with me, for fellowship? ‘CRANMER: So those of us whose names are there are damned, Sir Thomas? ‘MORE: I don't know, Your Grace. I have no window to look into another man's conscience. I condemn no one. ‘CRANMER: Then the matter is capable of question? ‘MORE: Certainly. ‘CRANMER: But that you owe obedience to your King is not capable of question. So weigh a doubt against a certainty—and sign. ‘MORE: Some men think the Earth is round, others think it flat; it is a matter capable of question. But if it is flat, will the King's command make it round? And if it is round, will the King's command flatten it? No, I will not sign.’ Id., pp. 132—133. DOUGLAS THEN WROTE: Where government is the Big Brother,11 privacy gives way to surveillance. **909 But our commitment is otherwise. *576 By the First Amendment we have staked our security on freedom to promote a multiplicity of ideas, to associate at will with kindred spirits, and to defy governmental intrusion into these precincts" Gibson v. Florida Legislative Investigation Comm., 372 U.S. 539, 574-76, 83 S. Ct. 889, 908-09, 9 L. Ed. 2d 929 (1963) Mr. Justice DOUGLAS, concurring. I write: Happy Memorial Day to all -- God please bless our fallen who lived and died to preserve constitutional governance in our wonderful series of Republics. And God open the eyes of those government officials who denounce the constitutions of these Republics by arbitrary actions arising out capricious motives.

  3. From back in the day before secularism got a stranglehold on Hoosier jurists comes this great excerpt via Indiana federal court judge Allan Sharp, dedicated to those many Indiana government attorneys (with whom I have dealt) who count the law as a mere tool, an optional tool that is not to be used when political correctness compels a more acceptable result than merely following the path that the law directs: ALLEN SHARP, District Judge. I. In a scene following a visit by Henry VIII to the home of Sir Thomas More, playwriter Robert Bolt puts the following words into the mouths of his characters: Margaret: Father, that man's bad. MORE: There is no law against that. ROPER: There is! God's law! MORE: Then God can arrest him. ROPER: Sophistication upon sophistication! MORE: No, sheer simplicity. The law, Roper, the law. I know what's legal not what's right. And I'll stick to what's legal. ROPER: Then you set man's law above God's! MORE: No, far below; but let me draw your attention to a fact I'm not God. The currents and eddies of right and wrong, which you find such plain sailing, I can't navigate. I'm no voyager. But in the thickets of law, oh, there I'm a forester. I doubt if there's a man alive who could follow me there, thank God... ALICE: (Exasperated, pointing after Rich) While you talk, he's gone! MORE: And go he should, if he was the Devil himself, until he broke the law! ROPER: So now you'd give the Devil benefit of law! MORE: Yes. What would you do? Cut a great road through the law to get after the Devil? ROPER: I'd cut down every law in England to do that! MORE: (Roused and excited) Oh? (Advances on Roper) And when the last law was down, and the Devil turned round on you where would you hide, Roper, the laws being flat? (He leaves *1257 him) This country's planted thick with laws from coast to coast man's laws, not God's and if you cut them down and you're just the man to do it d'you really think you would stand upright in the winds that would blow then? (Quietly) Yes, I'd give the Devil benefit of law, for my own safety's sake. ROPER: I have long suspected this; this is the golden calf; the law's your god. MORE: (Wearily) Oh, Roper, you're a fool, God's my god... (Rather bitterly) But I find him rather too (Very bitterly) subtle... I don't know where he is nor what he wants. ROPER: My God wants service, to the end and unremitting; nothing else! MORE: (Dryly) Are you sure that's God! He sounds like Moloch. But indeed it may be God And whoever hunts for me, Roper, God or Devil, will find me hiding in the thickets of the law! And I'll hide my daughter with me! Not hoist her up the mainmast of your seagoing principles! They put about too nimbly! (Exit More. They all look after him). Pgs. 65-67, A MAN FOR ALL SEASONS A Play in Two Acts, Robert Bolt, Random House, New York, 1960. Linley E. Pearson, Atty. Gen. of Indiana, Indianapolis, for defendants. Childs v. Duckworth, 509 F. Supp. 1254, 1256 (N.D. Ind. 1981) aff'd, 705 F.2d 915 (7th Cir. 1983)

  4. "Meanwhile small- and mid-size firms are getting squeezed and likely will not survive unless they become a boutique firm." I've been a business attorney in small, and now mid-size firm for over 30 years, and for over 30 years legal consultants have been preaching this exact same mantra of impending doom for small and mid-sized firms -- verbatim. This claim apparently helps them gin up merger opportunities from smaller firms who become convinced that they need to become larger overnight. The claim that large corporations are interested in cost-saving and efficiency has likewise been preached for decades, and is likewise bunk. If large corporations had any real interest in saving money they wouldn't use large law firms whose rates are substantially higher than those of high-quality mid-sized firms.

  5. The family is the foundation of all human government. That is the Grand Design. Modern governments throw off this Design and make bureaucratic war against the family, as does Hollywood and cultural elitists such as third wave feminists. Since WWII we have been on a ship of fools that way, with both the elite and government and their social engineering hacks relentlessly attacking the very foundation of social order. And their success? See it in the streets of Fergusson, on the food stamp doles (mostly broken families)and in the above article. Reject the Grand Design for true social function, enter the Glorious State to manage social dysfunction. Our Brave New World will be a prison camp, and we will welcome it as the only way to manage given the anarchy without it.

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