Last three months of 2008 see 54 percent increase in filings by individuals, businesses
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Bankruptcies filed in Oregon increased 54 percent in the fourth quarter of 2008, when the mortgage crisis caused a financial industry meltdown. “I’m seeing people that never would have dreamed of seeing me,” said veteran Portland bankruptcy attorney Ann Chapman, partner at Vanden Bos & Chapman LLP. “There’s a shortage of bankruptcy lawyers.” In all of 2008, 12,425 people and companies filed for bankruptcy at Oregon’s two federal bankruptcy courts in Portland and Eugene. That’s up 39 percent from 2007, when there were 8,928 new filings, according to new statistics from the U.S. Bankruptcy Court’s Oregon district, based in downtown Portland. Bankruptcy filings in Oregon surged from October to December, topping year-earlier figures by 54 percent. Filings peaked in October, with 1,329 new cases opened, as the financial crisis prompted a federal bank bailout package and decisively tipped the presidential race. As bad as it’s been for consumers, it’s even worse for businesses. There were 1,420 business bankruptcies in Oregon during 2008 – up 140 percent from 2007 – according to Automated Access to Court Electronic Records, a private company that tracks bankruptcy and other court filings. Chapman predicts the increase in bankruptcies isn’t close to peaking. “This feels different to me than any other recession,” she said. It’s hard to compare bankruptcy totals to prior years before 2005. That’s when a bankruptcy law overhaul, pushed by credit card companies and auto dealers, among others, made it much harder to file for bankruptcy and reduced some of the financial incentives for filing. As a result, last year’s filings in Oregon are about half the number filed in 2004, before the law was changed. But there were far more bankruptcy filings in 2008 than during a similar point in Oregon’s last comparable recession, when the timber industry collapsed in the wake of double-digit inflation. “We’re worse than we were in the 1980s,” said Mike Leachman, a Portland policy analyst for the Oregon Center for Public Policy. Leachman co-wrote a new booklet on the state of working families in Oregon in 2008-09, called “Rolling up our Sleeves.” Leachman calculated there were nearly 2.5 personal bankruptcies in 1981 for every 1,000 Oregon adults. Last year, there were 4.2. High joblessness and home foreclosures were closely related to the personal bankruptcies filed in the early 1980s. Now there’s another major causal factor, Leachman said: the rising number of Oregonians without health insurance and fast-climbing health care costs. He estimated that Oregon hospitals wrote off nearly $450 million in debts in 2008 from bills that patients were unable to pay. That’s three times the amount of bad debts written-off in 2000, he said. Rising credit card debt A major new wrinkle for small-business owners is the drying-up of bank credit. “I’m starting to get a wave of people in here that have viable businesses but they can’t get the financing that a small business needs,” Chapman said. The unraveling of risky mortgages, and the souring of Portland’s residential real estate market, undoubtedly are causing many people to file for bankruptcy. If someone loses his job and can’t pay his mortgage, filing bankruptcy can provide relief. “What else would he do?” asked Bill Ridge, a Portland mortgage broker who went through foreclosure on his own Portland home. “If you go through bankruptcy, it stops the foreclosure cold in its tracks,” he said, “so they’re buying some time.” Even clients who didn’t take inordinate risks – at least by the former standards before the real estate bubble burst – have been pummeled. With rising joblessness expected in Oregon and elsewhere this year, and area home prices still shaky, no one doubts the pace of bankruptcy filings will grow in 2009. And there’s another huge problem looming: people who are overextended on their credit card debts. More and more banks are crimping peoples’ credit card limits or raising their fees. Some credit-card holders are in for a rude awaking when their bank cancels their credit cards outright, Chapman said. If that occurs en masse, it could spark another wave of bankruptcies. “I think that’s inevitable,” she said. |
