More and more people are filing for bankruptcy across Central Virginia, and to see what got people in trouble, just sit in the trustee’s hearing for a morning.
One couple owned several rental properties around Richmond, including commercial property. But a zoning hiccup prevented them from renting one for more than two years, and then a tenant moved out of another. They could not keep up with the mortgages, and the banks took back most of the property.
An Army veteran and his wife owned a rental home in North Carolina but without sewer is was impossible to find a renter. They also owned an 18-acre alpaca farm in Caroline County. But the farm was losing more than $20,000 a year. The alpaca fur was not up to snuff, and they were not the prime kind valued by breeders, so the hobby farm lost money.
And two Vietnamese immigrants filed bankruptcy after one lost his job. A lawyer from Advantage Credit Union was on hand for that one to find out when the couple would be vacating the home, talking through a translator.
All would be considered middle class. All owned property, and several vehicles a piece.
In the bankruptcy court in Richmond, which handles the Eastern District of Virginia, a record 776 parties filed for bankruptcy in September, up from 319 last year and more than triple the monthly total from 2007. Almost all were personal bankruptcies, but many are tied to business failures, such as the alpaca farm or the rental property.
The bankruptcy proceedings are where the nitty-gritty of the recession gets ironed out. And as more and more people file, that has negative consequences for some businesses in Richmond, especially the banks that have lent filers mortgages on homes that may be under water. It’s also a bad omen for retailers because more and more filers are getting in trouble because of job loss, and that means they have far less money to spend around town.
On Tuesday, Roy Terry, a bankruptcy attorney with DurretteBradshaw who is also a Chapter 7 Trustee for U.S. Bankruptcy Court for the Eastern District of Virginia, Richmond Division, had his busiest docket ever.
As case after case came before him, he often asked to see more documentation about a title to a property, or the value of a major purchase, or investments and life insurance. But mostly he allowed filers to keep their used cars and other small assets.
This situation is playing out all over the country. Household bankruptcies topped 1 million for the first nine months of the year, the highest point since the system was overhauled in 2005, according to a bankruptcy trade group.
“No business sector is protected in this market,” said Lynn Tavenner, a bankruptcy lawyer at Tavenner and Beran and also a bankruptcy court trustee.
“More and more ‘middle class’ individuals are being forced to file because their family lifestyle in the suburbs has been wrecked by the unanticipated job loss for a major family breadwinner,” she said.
Tavenner said that until capital markets open up and funds become available, she expects to see increased filings on both the business and individual sides.
Terry said he’s also seeing more middle class filers because of job losses at major employers such as Qimonda. And while most creditors don’t have too many valuable assets, some do, which is a change from years past, Terry said.
“I am selling a 2007 Smart car,” he said.
“The bottom line is that the filings that occur now, people had more, and they were doing much better at one point, which means more assets to administer.”
Aaron Kremer is the BizSense editor. Please send news tips to Editor@richmondbizsense.com.
