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Debt Management Law News

September 9, 2008

Houston's economy spared from bankruptcy bug

It may not make you feel better while pumping gas, but another sign of Houston's economic strength can be found in that barometer of financial weakness: bankruptcies.

While the rest of the country is experiencing a nearly one-third increase in personal and business bankruptcies, Houston's numbers remain stable.

Nationwide, the number of bankruptcies nearly reached 1 million for the 12-month period ending June 30, 2008, the U.S. Courts office announced Wednesday. The 967,831 personal and business bankruptcies represent a 28.9 percent increase over the year ending in June 2007.

In the U.S. Courts for the Southern District of Texas, the federal division that includes Houston, Galveston, Laredo and the Rio Grande Valley, the case filings haven't changed significantly, however.

"Ours are kind of a flat line, about 1,000 a month," said David Bradley, chief deputy clerk for the Houston area district.

By some measures, there even is a dip in the personal bankruptcy filings in the federal district that includes Houston.

U.S. Courts statistics for the district show that while business bankruptcies in the first quarter of 2008 inched up to 168 from 155 in the same period in 2007, personal bankruptcies dropped from 2,927 in 2007 to 2,764 in the first quarter of 2008.

Overall, in the first six months of 2008, there were 6,299 bankruptcies filed in the Houston district. That was about 5 percent fewer than the 6,658 cases filed in the last six months of 2007.

"Occasionally, it happens that you have a district that will be at odds with the national trend," said Jack Williams, resident scholar at the education and research group the American Bankruptcy Institute in Alexandria, Va. "It may be an anomaly, but your local industry still depends on the energy sector and sectors tied with it and they have done reasonably well."

Williams said by the end of the year there could be 1.2 million personal and business bankruptcies filed nationwide, compared with 800,000 in 2007. He expects it to get worse.

"It's a bad sign that Chapter 13s are down. That's the bankruptcy where you have a plan to pay some money back over three or five years. And Chapter 7s are up. That's where there is no such plan," he said.


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