What goes up must come down and bankruptcies are no exception.
Though total bankruptcy petition filings have steadily climbed since 2008, attorneys have noted by observation that the law of gravity still applies.
“If you asked me two months ago if they would continue to increase, I”™d say yes, but in the last two months, the ones who have been able to hang on look like they”™re going to make it,” said Anthony Parent, a tax attorney at Wallingford-based Parent & Parent L.L.P. and founding partner of IRS Medic, a Connecticut company that solves clients”™ tax issues before a common last resort ”“ bankruptcy.
There were approximately 1.5 million bankruptcy petitions filed in the U.S. Bankruptcy Courts during a 12-month period ending March 31, 2010.
A year earlier, that number was 1.2 million.
For a 12-month period ending March 31, 2008, there were 901,927 bankruptcies filed.
Anne Penachio, a White Plains, N.Y.-based bankruptcy attorney at Penachio Malara L.L.P., has seen “less traditional reorganizations and more businesses simply closing their doors or consummating a sale of their business to a competitor or to a separate entity.”
The number of business bankruptcies nationally consistently climbed over a three-year period as indicated by U.S. Bankruptcy Courts data.
In the 12-month period ending March 31, businesses numbering 61,148 filed for bankruptcy; in 2009 that number was 49,091; and in 2008, it was 30,741.
“We”™ve had a lot of business clients, a lot of restaurants and a lot of landscapers,” Parent said. “About 60 or 70 percent of our clients are in construction. What”™s happening now is a lot of these guys have folded up or will be a single-man operation and typically go off the books so they can underprice legitimate businesses because they don”™t pay taxes, so there is some strain there.”
Penachio has seen her fair share of restaurant filings, which have included Iannellis Cucina in downtown White Plains, N.Y., which filed for Chapter 11 bankruptcy protection in January.
“I think the demise of this business was based on three factors,” she said. “There was an expansion, which cost more than what was anticipated, the general economic downturn and (alleged) mismanagement attributed to a former partner.”
The Iron Tomato in downtown White Plains, N.Y., also filed for Chapter 11 protection last month, as did Koo Restaurant in Rye, N.Y.
A good portion of Penachio”™s clients have filed petitions for personal bankruptcy.
“Our clients tend to be higher-net-worth debtors because of where we are geographically,” she said. “They”™re people who are homeowners with a steady income. They”™re people who in the past could rely on family members or refinance their house or sell their home, so they”™re not just Chapter 7 debtors with credit card debt.”
