Archive for the ‘Year in Bankruptcy’ Category

Since MF Global filed for bankruptcy protection at the end of October, much of the media attention has been focused on the scandal of the $1.2 billion in investor money that the firm cannot account for. That money, which reportedly belongs to about 38,000 investors, may have been used for MF Global’s own (questionable) investments in European debt.

But now, as the end-of-year charity giving season is in its final throes, another kind of fallout from the MF Global bankruptcy is coming to light: its effect on charity donations. According to sources, the country’s eighth-largest bankruptcy is likely to affect charity giving in a number of ways:

  • Individual donors who invested with MF Global and lost money (when the firm misplaced those funds) may be less likely to contribute to charities than they were in recent years. Because many smaller investors lost significant amounts of money (relative to their total net worth), tens of thousands of potential charity donations might have been wiped out by MF Global’s collapse.
  • Corporate charity organized by the CME Group will likely not occur. In years past, sources note, the CME Group kept a trust (called the CME Trust) of $50 million to compensate investors who were unfortunately hooked into (and who lost money by) fraudulent investment schemes. In the past, most of that money got donated to charities at year’s end; this year, however, the entire trust went toward compensation of MF Global investors who lost money.
  • Some charities invested money with MF Global. In addition to the individual clients who lost money, organizations (including nonprofits and charities) put their money with this firm, as it was meant to be a relatively safe investment option. Now the firm’s bankruptcy will translate to a direct loss of funds for charity investors.

Investors & Charitable Grants

It’s no secret that the wealthiest citizens of the U.S. are often the ones behind major charitable grants and donations. But few news sources have discussed the potential effect a major bankruptcy like MF Global’s, which includes debts of more than $39 billion, is likely to have on charitable organizations this year.

What is perhaps even more troubling is that this blow to charities comes during a time when individual donors have cut back on charitable contributions because of unemployment and reduced wages. Naturally, the persistently tough economy also means that more Americans than ever are in need of the support that charitable organizations traditionally offer.

In recent years, the CME Trust donated millions of dollars to Chicago-area educational institutions, including universities, charter schools, and organizations that fund education in the city. Without such donations, those and other groups could face significant financial difficulties in 2012.

Reports from the Christian Science Monitor indicate that former New Jersey Governor and CEO of MF Global Jon Corzine may have known about the use of client money in a loan to one of the company’s European partners.

The report is just the latest in the saga in MF Global’s bankruptcy case, which it filed on October 31, 2011. At the time of the filing, Corzine allegedly claimed that he had been unaware of the missing customer money until the day before the firm entered bankruptcy protection.

The new information (from sources including an executive from the Chicago Mercantile Exchange (CME)), however, suggests that Corzine might have known about the misuse of client funds much earlier. Given the questionable circumstances surrounding the case, Corzine and others involved could face criminal charges for their involvement in the trades.

Brokerage Firms, Client Money, and Bankruptcy

So what does the disappearance of $1.2 billion in client money mean? Here’s a breakdown of how MF Global operated and what the various facets of its bankruptcy might mean:

  • MF Global, before its bankruptcy filing, was a brokerage firm. It traded client money (as well as its own funds) on CME exchanges.
  • During his tenure as CEO (March 2010 to November 2011), Corzine attempted to convert MF Global into a full investment bank. As such, the company would have been able to engage in more types of financial transactions. As a brokerage firm, MF Global only managed transactions between buyers and sellers of various derivatives. In theory, the company might have been able to pull in greater profits as an investment bank.
  • Legally, brokerage firms and other investment institutions are not permitted to use client money for company expenses. In other words, MF Global could invest its own funds but could not dip into client accounts—for precisely the reason that a bad bet could translate to the disappearance of such money.
  • MF Global apparently broke that rule (and possibly the law), by investing client funds in questionable places.
  • Because of heavy losses linked to investments in European debt, MF Global filed for bankruptcy protection in late October. As its financial standing became a matter of public record, it became clear that the firm lost client money on ill-advised investments.

At present, it isn’t clear how the bankruptcy judge and trustee overseeing the MF Global case will handle the problem of the missing funds. In this situation, clients who invested with MF Global are among the firm’s bankruptcy creditors and as such will lose money if MF Global’s debts are discharged by the bankruptcy court.

The bankruptcy court will rule on how money will change hands regarding this incident. If investigators have reason to believe that insiders at MF Global broke the law (in addition to the rules that regulate brokerage firms), the Justice Department may try Corzine and others in criminal court.

Wednesday, July 13th, 2011

Personal Bankruptcy Filings Down This Year

Recently released data show that consumer bankruptcy filings in the first half of 2011 fell by eight percent compared with the first half of 2010. The numbers, reported by the American Bankruptcy Institute, paint a potentially hopeful picture for the overall rate of economic recovery:

  • From January 1, 2011 to June 30, 2011, a total of 709,303 personal bankruptcy cases were filed in the U.S.
  • In the first six months of 2010, 770,117 personal bankruptcy cases were filed.
  • This year has seen eight percent fewer personal bankruptcy filings than last year.
  • Personal bankruptcy filings in June 2011 also fell compared to those in June 2010: 119,768 cases were filed this year; 126,270 cases were filed in June 2010.
  • Compared to May of 2011, June filings rose by four percent.

What Do Personal Bankruptcy Filings Mean for the Economy?

It’s impossible to measure the health of the economy by looking at only a single indicator. But still, these bankruptcy numbers seem to follow other trends in economic factors:

  • Overall, unemployment has been steadily decreasing for several months. The pace of the decrease has been slow – this seems to mirror the slight decrease in personal bankruptcy filings and suggest a gradual economic recovery.
  • The last two months have shown slight upticks in the unemployment rate, which might also be reflected in the May-to-June increase in bankruptcy filings.
  • Bankruptcy filings are still on pace to hit or surpass a million this year, meaning that the economy is still a long way from fully healthy.

What Can Personal Bankruptcy Do for Unemployed Americans?

Surveys given to those who file for bankruptcy in the U.S. almost always indicate that unemployment plays a contributing role in prompting people to file for bankruptcy protection. And it’s no wonder: bankruptcy can offer powerful protections to those who have lost their job or had their hours reduced.

Specifically, bankruptcy offers:

  • Protection of assets: Once filers submit their bankruptcy petition, the court protects certain assets from repossession and/or garnishment. In Chapter 7 bankruptcy, these protections are called “exemptions.”
  • Protection from creditors: For the duration of any bankruptcy case, a legal protection called the automatic stay prevents creditors from making contact with or collecting from filers. The automatic stay can halt foreclosure, vehicle repossession, wage garnishment, debt lawsuits and more.
  • Discharge of debts: At the end of a successful bankruptcy case, the court discharges (that is, eliminates) all eligible debts. Filers are not responsible for repaying discharged debts.
  • Time to catch up on payments: In Chapter 13 bankruptcy, filers get a chance to catch up on late payments with help from the court.

Tuesday, May 31st, 2011

Bankruptcy Filings Dropped in April

Recently released numbers on personal bankruptcy filings show that April’s numbers were down from both March 2011 and April 2010, more or less following the trends that experts have predicted for the remainder of this year. Here’s a closer look at the specifics, and what this means for you.

Breakdown of April Bankruptcy Figures

  • The 21 business days in April saw 130,000 total bankruptcy filings, which comes to 6,177 filings per business day.
  • The number of filings shows a decline of 2.9 percent from March, and 7.1 percent from April 2010.
  • So far this year, filings have decreased each month at a rate somewhere between 5.6 percent and 8.2 percent compared to 2010 numbers.
  • In the past 12 months, 4.9 in 1,000 people have filed bankruptcy petitions. The number in 2004 (before the new bankruptcy law was passed) was 5.5 per thousand.

According to these statistics, April 2011 bankruptcy numbers suggest a decline in bankruptcy filings both compared to recent months and to last year. Bankruptcy filing rates, though not as popularly cited as unemployment numbers, can be used to offer at least a partial picture of economic recovery.

Projected Bankruptcy Filings for 2011

Based on the numbers for April and 2011 so far, predictions for total bankruptcy filings this year include the following:

  • 1.475 million bankruptcy filings if Americans continue filing at the daily average rate (5,876) for the first four months of 2011 combined;
  • 1.525 million bankruptcy filings if we continue at April’s daily average rate (6,177); or
  • 1.499 million bankruptcy filings if the last eight months of the year make up the same proportion of filings as they did in the last two years.

How does that compare with the recent past? In 2010, the country had 1.56 million total filings; in 2009, the total was 1.474 million; and in 2008, 1.118 million. If filings stay on track, then, it looks like 2010 might have been the peak year for bankruptcy filings and 2011 will be the beginning of a decline.

There is no guarantee, however, that bankruptcies will steadily decrease. After all, the housing market is still glutted with foreclosure properties and home prices don’t seem to be rising. As a new wave of foreclosures begins to affect homeowners, combined with sluggish growth in the jobs sector, the need for bankruptcy protection could climb or remain constant for a few years to come.

Bankruptcy Filings and the “New” Law

If nothing else, these latest bankruptcy numbers suggest (once again) that the Bankruptcy Abuse Prevention and Consumer Protection Act passed in 2005 had little real effect on bankruptcy filing totals.

Those truly in need of the financial relief and protection bankruptcy offers are still largely able to get that help from the bankruptcy court, despite the tightened restrictions the law introduced.

The recession has affected us all, but who's been hit the hardest?

Last year there were nearly 1.5 million bankruptcy filings--learn about the people behind those numbers. Check out our latest You Tube video and please share it with your friends.

In a decade with two recessions, two wars and skyrocketing unemployment, bankruptcy became a financial safety net for a record 13 million Americans.

It's no wonder that Time called it the decade from hell.

Bankruptcy Year in Review

Between January 2000 and December 2009, 13,363,085 personal bankruptcy petitions were filed as Americans attempted to defy debt, stop foreclosure and get a fresh financial start.

A large percentage of those came in 2005, when a new bankruptcy law threatened to make it more difficult to file Chapter 7 bankruptcy. More than 2 million bankruptcies were filed that year, as consumers rushed to beat the October deadline.

The decade total was an increase of nearly 29% over the bankruptcies filed in the 1990s.

Thursday, January 14th, 2010

Bankruptcy Filings Hit 1.44 Million in 2009

Bankruptcy filings in 2009 reach 1.44 million as consumers and businesses dealt with unemployment, foreclosure and tight credit.

Bankruptcy Year in Review

A total 1,435,425 bankruptcy petitions were filed in the 50 states and Washington D.C. That figure increases to 1,446,967 when Puerto Rico, Guam and the Virgin Islands are taken into count.

Nationwide, the bankruptcy rate was up 32% in 2009 compared to 2008 and reached the highest level since the 2005 bankruptcy law change.

Arizona saw the largest increase in bankruptcy filings in the U.S., with 77% more filings in 2009 than 2008. Nevada and Wyoming followed, each with a 59% increase year-over-year. Nevada had the most filings per capita.

Bankruptcies for the year peaked in October, when 133,365 petitions were filed—the highest amount since October, 2005, when consumers rushed to file before the BAPCPA law went into effect. Filings slowed in November and December, but remained above the 2008 monthly totals.

Business bankruptcy filings are increasing at an even faster pace than the record-setting personal bankruptcy numbers from 2009.

Last year, Chapter 11 business bankruptcy filings increased 50 percent from 2008, according to a Business Week report.

Bankruptcy information, trends and statistics for this year

In all, more than 15,000 business decided to file Chapter 11 bankruptcy. Of these filings, some reorganized an remained in business, some were sold, and others sold their assets and closed shop completely.

But some businesses filed a Chapter 7 bankruptcy, which results in a liquidation of assets. Combined Chapter 7 and 11 filings resulted in a 38 percent increase in business filings for 2009.

The total comes to 89,402 businesses filing bankruptcy in 2009, reports the Wall Street Journal. That's almost 25,000 more business than needed help the previous year.

And, despite some signals that the economy is getting, business bankruptcy filings continued to pick up steam as the year went on. Business filings in December rose 3 percent compared with November, and were 13 percent higher than the same month for the previous year.

Among those business filing bankruptcy were 207 publicly traded companies.  That's the third-highest total since 1980. And these companies also include some of the biggest and richest in the country, holding around $600 million in assets at the time of their bankruptcy filing.

That number is the second most of all time, just behind 2008's monstrous year which included the massive Lehman Brothers bankruptcy.

During the first decade of the 2000s, more than 400,000 businesses will have filed for bankruptcy protection, according to numbers from the American Bankruptcy Institute.

Wednesday, January 6th, 2010

December Bankruptcy Filings Up 33 Percent

Bankruptcy Year in Review
Consumer bankruptcy filings reached 113,274 in December, 2009, an increase of 33 percent over December, 2008, according to data released by the American Bankruptcy Institute, bringing an end to the highest year for bankruptcy since 2005.

The December total was also a slight increase over the 112,152 consumer bankruptcies filed in November, 2009, a sign that even the holiday season could have exacerbated consumers' financial stress.

Ten months in 2009 had total consumer filings top 100,000--only January and February were below that mark.

Bankruptcy Chapters

According to the ABI, 28 percent of consumer bankruptcies in December were Chapter 13 bankruptcy filings, with the majority of consumer filing Chapter 7.

Bankruptcy is often considered a lagging economic indicator, and typically remains high even with other signs of economic turnaround can be seen. The unemployment rate, for example, dropped slightly in November from its October high of 10.2 percent, and is expected to have dropped in December as well.

Thursday, December 31st, 2009

Big Names File Bankruptcy in 2009

As 2009 winds down, we'll take a quick look at some of the biggest brands and names in business that decided to file bankruptcy.

Big Brand Businesses Filing in 2009:

  • Chicago Cubs - The Northsiders briefly entered bankruptcy protection when the team was sold.
  • Phoenix Coyotes -The Coyotes are playing on, and playing well, despite failed attempts to sell the team.
  • Six Flags -Theme park faced difficulty, but that old guy is still dancing
  • Eddie Bauer -Clothing manufacturer sold, but still open.
  • Reader’s Digest -Popular magazine still publishing.
  • Trump Casinos -Maybe the Donald needs a new apprentice?
  • The Philadelphia Inquirer -Rough year for newspapers across the country
  • Chicago Sun-Times -Not to be out done by their crosstown rivals at the Tribune, the home of Rogert Ebert filed bankruptcy before being sold.
  • Bennigans -The popular restaurant chain closed up shop after filing.
  • Charter Communications -One of the country's largest radio station operators - 255 stations across the country.
  • Ritz Camera - Still open, but forced to shutter some shops
  • Samsonite -Luggage maker and retail store closed some shops, but still operating
  • Tavern on the Green -Future of famed New York restaurant still up in the air
  • Crabtree & Evelyn -Soap-seller still open
  • Filene’s Basement - Deals still available as clothing store purchased and still open
  • S&K Menswear -Suit retailer got unbuttoned, future still undecided
  • Gottschalks -Department store gone for good
  • Southern Voice – Large gay magazine in Atlanta quickly folded up
  • New York Off Track Betting Corp -State-run betting offices muddied in debt
  • Steak & Ale Restaurant and Roadhouse Grill -Steakhouses across the country got burned during the recession