In past economic slowdowns, metro Atlanta's armor of unbridled growth shielded it from downturns hitting the rest of the country.
With the national economy in recession, the banking sector wringing out its own problems and, now, commercial real estate development about to collapse, Atlanta's mojo is gone.
Underscoring how sour metro Atlanta's economy is: Filings in the U.S. Bankruptcy Court's Northern District of Georgia rose nearly 36 percent in the first quarter of this year, compared to the same period last year.
Total filings in the Northern District, which includes metro Atlanta, jumped to 12,059 from 8,878 in the first quarter of 2008, court statistics show.
"It was not a surprise. If you read the papers or watch TV, the sense is that there's economic stress," said W. Yvonne Evans, clerk of the bankruptcy court. "We expect 2009 will exceed 2008."
The biggest jump in the quarter came from Chapter 7 filings, which means a total liquidation of a company's or individual's assets. Those cases rose 61 percent in the quarter.
In contrast, Chapter 11 filings — which allow a bankrupt company to reorganize its debts and obtain new financing — fell slightly in the quarter by 5.6 percent.
The Chapter 7 figures aren't necessarily surprising given current economic conditions, said Frank W. DeBorde, who heads the creditors' rights and bankruptcy group at Morris, Manning & Martin in Atlanta.
"There are more corporate 7s than I've ever seen in the last 20 years," he said, explaining companies are having difficulty finding buyers or getting financing. The rising number of layoffs, upside-down mortgages and credit card debt explains the consumer liquidation filings, he said.
And, while the number of corporate reorganization filings in Georgia's northern district fell in the quarter, he said, many firms based here file Chapter 11 in Delaware because they're incorporated in that state for tax purposes.
Since Atlanta's growth in the last several years was so reliant on commercial real estate, many Atlanta bankruptcy attorneys predict a spike in Chapter 11 filings from that sector later this year.
"There will be more Chapter 11s here, but the corporate covenant defaults and commercial real estate cases are still in the workout stages," DeBorde said. "We're going to be disportionately worse off over the next two or three years because of our over-reliance on real estate development."
About the Author
Keep Reading
The Latest
Featured
