Wednesday, January 14, 2009

Bankruptcy Builds Up

Bankruptcies went up 47% in Utah in 2008.  That's still just half what they were before Congress granted the credit card industry its wish and locked the courthouse doors to most people, but given the new barriers for filing, it's a graphic representation of the dismal state of affairs.  It doesn't promise to improve soon, either.  Where the traditional cause of a bankruptcy filing used to be a specific event (divorce, job loss, hospital stay), it now seems to be systemic.  Households and businesses alike have simply accumulated so much debt over time that it's crushing them.  And the triggering element in that debt load is more frequently real estate, with debt service going through the roof and value going through the floor, be it personal residence or investment property.

And what if you're one of the millions being crushed.  Bankruptcy is not the end of the line; it's a new beginning, at least if you get smart about your finances.  I took a construction company into Chapter 11 bankruptcy (used for reorganizing businesses) in Fall 2007.  Normally you have to file a plan in Chapter 11 explaining how you're going to reorganize and operate the company.  We didn't need to get that far.  We negotiated away a few problem debts, and were able to dismiss the case.  The company emerged stronger, and today, in spite of the construction climate, the company is still making its way.

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