Wiregrass area sees jump in bankruptcies in 2008

A significant jump in bankruptcy filings in the Wiregrass could indicate the area isn’t completely insulated from the economic recession, and a state economic analyst said he expects to see another jump in bankruptcies in 2009.

A review of Chapter 7 bankruptcy filings in area counties revealed an increase of about 28 percent from 2007 filings.

A Chapter 7 bankruptcy filing forces filers — either individuals or businesses — to liquidate all assets in order to repay creditors. Businesses which file Chapter 7 must cease operations and go out of business. Other types of bankruptcy filings, such as Chapter 11 or 13, allow businesses to reorganize and remain operating to help pay creditors.

Residents and businesses in Houston, Henry, Dale, Coffee, Geneva, Barbour and Covington counties in Alabama may file through the Dothan office of U.S. Bankruptcy Court. Residents in the Florida counties of Holmes, Jackson and Washington may also file through the Dothan office.

Overall, the Dothan office recorded 589 filings in 2008, up from 459 in 2007. In 2006, the Dothan office recorded only 384 filings.

In Houston County alone, Chapter 7 filings increased from 160 in 2007 to 211 in 2008. Filings also jumped in Dale County from 77 to 92, and in Coffee County from 56 to 67.

Ahmad Ijaz, an economic analyst with the University of Alabama Center for Business and Economic Research, said the increase in bankruptcies, combined with a jump in foreclosures, are “lagging” indicators of a weakening economy.

“With a recession being predicted for 2009, we will definitely see an increase in both foreclosures and bankruptcies,” Ijaz said.

Ijaz also said other indicators of a weakening economy could include slow retail sales, declining consumer confidence, increase in the unemployment rate, a drop in sales tax collections and others.