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Wednesday, August 27, 2008
Bankruptcy Filings Flirt With 1M in 2007
Associated Press
NEW YORK--Nearly 1 million individuals and businesses filed bankruptcy in the 12 months ended June 30, according to U.S. Court data released Wednesday.
There were 967,831 bankruptcy cases filed since July 1, 2007, up 28.9% from the prior 12 months, when cases totaled 751,056.
Non-business filings made up 96.5 % of those cases, totaling 934,009. Of those cases, which represent individuals, 592,376 were Chapter 7 filings, which involve liquidation of nonprotected assets, like family homes. The total also included 340,852 filings for Chapter 13 protection, which allows an individual to reorganize their finances and pay down their debt. An additional 780 individuals filed for Chapter 11, which is normally used for businesses but can apply to individuals who are reorganizing but have more debt than allowed under Chapter 13.
On the business side, a total of 33,822 cases were filed in the 12-month period, including 23,372 under Chapter 7, which allows for an orderly shut down of the business. There were 6,513 Chapter 11 filings, 314 Chapter 12 filings for family farm bankruptcy, and 3,569 Chapter 13 filings for small-debt reorganization.
By region, the highest number of combined filings was in the U.S. Bankruptcy Court's 6th District, which encompasses Kentucky, Michigan, Ohio and Tennessee. The total came to 167,561, up 21.2% in the past year.
Tennessee had the highest filing rate per capita, at 6.92 filings per 1,000 people. Michigan had the highest per-capita rate of Chapter 7 filings, at 3.82 per 1,000 people.
The largest percentage increase, 60.9%, was in the court's 9th District, which includes California, Arizona and Nevada, which are among the states hardest hit by the housing meltdown.
Filings spiked to 276,510 in the three months ended June 30 to the highest quarterly filings since late 2006. Of those, 266,767, or 96.5%, were individual filings, and 9,743, or 3.5%, were business filings.
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Not everyone has the financial ability to own and rent out multiple houses for extra income. And even fewer people want to deal with late night calls from tenants crying about their broken oil burner. Well, thanks to real estate investment trusts, or REITs, you don't have to deal with the stresses of being a landlord to make money off of the real estate market.
A REIT is any entity that pools money from a group of investors to buy different kinds of real estate or real-estate-related assets, such as buildings or mortgages on buildings. It uses the income from rent and loan interest to pay out a steady monthly dividend to its investors.
There are three types of REITs. The most common one is an equity REIT, which simply buys buildings and generates revenue from the rent it charges. Mortgage REITs loan out money to owners of real estate for mortgages or buy existing mortgages to collect interest, which is then paid out to the REIT's investors. Finally, there are hybrid REITs, which are a combination of mortgage and equity REITs.
REITs can be public or private. Public REITs are bought and sold just like stocks and are listed on exchanges, while private REITs can only be bought through direct-participation programs. With private REITs, the investors are actually part owners of the real estate rather than just shareholders of the REIT corporation. They can't sell shares and they typically have to keep their money tied up for eight to 12 years. However, there's the benefit of less volatility since the market can influence public REITs.
One potential drawback to REITs is how they are taxed. While qualifying equity dividends are normally subject to only a maximum of 15%, the dividends from REITs are taxed as regular income, which could be much higher -- depending on how much money you make.
