Bankruptcies Still Mount

The current wave of bankruptcy filings among Ventura County companies probably will continue for some time even though the recession may be ending, according to William E. Winfield, a bankruptcy law expert and partner in the Oxnard-based law firm of Nordman, Cormany, Hair & Compton.

“Many troubled companies, especially small ones, hang on longer than they probably should,” Winfield said. “This creates a delayed effect, such as we saw in the mid-1980s when many firms filed for bankruptcy as a result of the 1981-82 recession.”

Similarly, Winfield said, he expects to see many Chapter 11 and Chapter 7 filings under the Bankruptcy Code well into 1993.

In the Central District of California, which includes Ventura County, 90% of Chapter 11 business reorganizations fail and are converted to Chapter 7 liquidations, Winfield said. Of these, he noted, the average distribution to unsecured creditors amounts to only 7 cents on the dollar.

So many companies and individuals have filed petitions in the past two years that “the system is now on overload--it isn’t working,” Winfield said. But he voiced optimism that the logjam may be partially broken by a bill recently passed by the Senate creating a Chapter 10, which would reduce reporting and paperwork now required under Chapter 11. The legislation still faces a vote in the House.

Winfield said business people whose customers file for bankruptcy often can reduce legal costs by obtaining files and submitting claims on their own. This legwork can now be done in Santa Barbara, where all Ventura County bankruptcy cases have been processed since June 1. Ventura County filings formerly were processed through the Bankruptcy Court in Los Angeles.

“Look at the list of assets as compared to liabilities to consider whether hiring an attorney is justified,” Winfield suggested. If a debtor’s net assets are large enough and a claim is backed by a contract, a business that is owed money probably should be represented by a lawyer, he said.