Bankruptcy numbers point to slowdown

It isn˜t time to hit the panic button yet, but the superheated regional economic expansion of the past few years may be in for an early frost. That˜s because bankruptcy filings throughout northern Front Range communities in Colorado and Wyoming are posting their highest percent increases since the local economic meltdown of the mid-1980s.In 1996, U.S. Bankruptcy Court in Colorado received 16,336 petitions under regulations governing Chapters 7,11 and 13. That represents a 20 percent increase over the number of petitions filed in 1995, which saw a greater than 6 percent increase over 1994.
In the Denver area, defined by the U.S. Court as extending east to Kansas and north to Wyoming, filings rose 17 percent, an increase over 1994 similar to that experienced statewide. And just in case you think it˜s a temporary blip, beware.
"Through September of 1997," said Court Clerk Brad Bolton, "there has been a year-to-year rise of 20 percent over last year. We expect that to continue to year˜s end."
The increase is equally severe in Wyoming, where 1996 witnessed a 45 percent increase over 1994 filings. There, 1997 petitions are running a little over 6 percent ahead of last year, which had 1,774 filings.
Examined closely, however, the bankruptcy figures may be interpreted more as a tightening of credit than a business slowdown. Most bankruptcy petitions are being filed under Chapter 7 or 13.
"Chapter 7 is a total liquidation," explained Leona Cortez, chief deputy clerk of the U.S. Bankruptcy Court in Wyoming. "Chapter 13 involves payback, a wage-earner˜s plan, we usually call it. Chapter 11 involves the plan for reorganization of a business.
In both states, the number and percentage increase of Chapter 7 and 13 filings are high. However, while the percentage increase in the business reorganization Chapter 11 filings is high, their absolute number is relatively low, an increase of only three in Colorado and four in Wyoming last year. That means the current increase in bankruptcies may be consumer driven.
"In Wyoming," said Arlene Soto, director for region 4 of the state˜s Small Business Development Center, "I would say the bankruptcy situation has worsened during the past six months."
Soto said anecdotal evidence points to a big jump in bankruptcy petitions being filed by individuals and by small businesses.
"Sometimes we get a lot of questions about starting a business," said Soto, "and other times about closing a business. Right now, we are getting a lot of questions about closing a business."
Mike Hauser, president of the Fort Collins Area Chamber of Commerce, said it is true that Colorado˜s economic expansion is cooling, but he does not see the rise in bankruptcies as a threat to the state˜s current fiscal health.
"Growth has slowed from previous years," agreed Hauser, "but that was predicted by everyone. We were running pretty hot there for awhile."
Hauser suspects that Colorado˜s rise in population and in the number of new businesses started in the 1990s may render bankruptcy figures questionable as a measure of the state˜s economic well-being. And there is the reality that, even in good times, not all ventures thrive."The small-business environment is volatile," he pointed out. "You hope everyone will succeed, but the reality is that not all do."