Bankruptcy filings here seem to be leveling off
Written on July 13, 2011 by Rose Ryrie
Tucson bankruptcy filings – which spiked in recent years due to tight credit, plummeting housing values and the persistently sluggish economy – may have started to level off.
Total filings in the first half of 2011, at 3,808, were 7.5 percent fewer than in the same time period last year.
Statewide, the number of bankruptcy filings has also been dropping, data from the U.S. Bankruptcy Court’s Arizona District show. There were 19,080 bankruptcy filings in Arizona during the first six months of 2011, a 7.5 percent drop compared to the first half of 2010.
The decreases come after four years of booming bankruptcy rates. Filings have roughly tripled since the onset of the recession. From January to June 2007, there were 1,208 bankruptcy filings in Tucson.
The most frequent filing is Chapter 7, when people or businesses sell off their remaining assets to repay creditors. In Tucson there were 3,052 such filings in the first half of 2011, down 8.5 percent from the same period in 2010.
But Tucson’s Chapter 11 filings – used primarily by businesses to restructure their debts – haven’t experienced a similar decrease. There were 49 Chapter 11 filings in the first half of 2011. During the same time last year, there were 40 such filings.
Many of those bankruptcy filings are from companies connected to real estate deals financed at the wrong time.
“I’m continuing to see a lot of problems with commercial real estate,” said Michael McGrath, a local bankruptcy attorney.
And it’s not over yet. Additional companies linked to distressed real estate projects will likely file for bankruptcy protection in coming months, McGrath said.
As to whether lenders are more willing to work with borrowers, McGrath said that can depend. An equity fund or life insurance company can be willing to negotiate, he said. Traditional banks have been more reluctant, though, and have often begun selling the bad debt at a discounted price to get the nonperforming asset off their books.
McGrath is representing Aberdeen Group LLC, the company that is developing a commercial project called Marana Main Street. Through its affiliate companies, Aberdeen Group filed for Chapter 11 bankruptcy protection in February, as the lender on the property had scheduled a foreclosure sale.
The developers are now working to raise additional cash, McGrath said, and are asking their lender to discount the note so they can move forward with the project near Marana’s town center.
Several of this year’s Chapter 11 filings are companies tied to Michael Hanson’s Transwest Partners/NCH Corp. Hanson built an extensive real estate portfolio – including hotels, shopping centers and apartment buildings across Tucson – in 2007 when property values peaked. Financial pressure on those properties grew as leisure travel slowed, property values plunged and consumers stopped spending.
Hanson’s company that owns the Doubletree Hotel Tucson at Reid Park, near East Broadway and Alvernon Way, filed for bankruptcy in May not long after receiving a foreclosure notice. His companies that own Hampton Inn & Suites, TownePlace Suites by Marriott Tucson and La Posada Lodge & Casitas, all at the southeast corner of North Oracle and West Rudasill roads, each filed for Chapter 11 bankruptcy protection in June.
Another Hanson company, Gallery Row Limited Partnership, which owns the upscale Gallery Row shopping center on East Skyline Drive near North Campbell Avenue, also filed for Chapter 11 bankruptcy protection late in May after receiving a foreclosure notice.
Bankruptcy filings
Chapter 7 (liquidation)
% chg % chg from June from Midyear midyear ’11 June ’10 ’11 ’10
Tucson 558 -7.5 3,052 -8.5
Phoenix 2,089 -5.3 11,974 -5.2
State 2,798 -6.4 15,932 -6.2
Chapter 11 (reorganization)*
% chg % chg from June from Midyear midyear ’11 June ’10 ’11 ’10
Tucson 4 100 49 22.5
Phoenix 29 -19.4 190 -31.2
State 35 -14.6 246 -25.2
*Mostly business filings
Total (includes Chapter 13 filings)
% chg % chg from June from Midyear midyear ’11 June ’10 ’11 ’10
Tucson 661 -10.2 3,808 -7.5
Phoenix 2,434 -8.4 14,271 -7.5
State 3,263 -9 19,080 -7.5
Similar Posts:
- 3 Tucson hotels file for bankruptcy protection
- Understanding the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005
- Chapter 13 Bankruptcy: Pros and Cons
- Foreclosure activity slowed in first half of 2011
- Foreclosure filings up sharply in October as banks ramp up foreclosures
