The number of businesses being reorganized under bankruptcy law protection nearly doubled in the area's three bankruptcy courts last year, the Administrative Office of the U.S. Courts said yesterday.
The jump in what are known as Chapter 11 bankruptcies led an overall increase in personal and business bankruptcies and left the area's courts struggling to keep up.
"We feel it on a daily basis," said Terrence S. Miller, deputy clerk in charge of the Rockville bankruptcy court. "We get tons of paper work. There can be thousands of pages of proofs of claims in a single case."
The surge in bankruptcy filings of all kinds is linked to the region's economic recession, which has been especially tough on the real estate, construction and retail sectors. In addition to the Chapter 11 bankruptcies -- in which companies continue to operate while gaining temporary relief from creditors -- increases in personal bankruptcies and business liquidation filings have clogged the courts.
Alexandria's bankruptcy court had the biggest jump in total bankruptcies, to 3,503 from 2,681, an increase of 31 percent. Rockville's total was up 16 percent, to 4,462 from 3,840. And the District's docket went to 1,095 from 1,069 cases, a 2.4 percent increase.
The number of Chapter 11 filings increased by 86 percent in the District bankruptcy court, from 56 to 104; by 84 percent in the Alexandria court, to 270 from 147; and by 69 percent in the Rockville court, to 233 from 138.
Chapter 11 bankruptcies mean more work for judges, lawyers and others than do personal bankruptcies or liquidations because they generate more litigation on behalf of creditors.
"What I'm seeing is a dramatic increase in the number of Chapter 11s," said Dennis Early, assistant U.S. bankruptcy trustee in Alexandria. He added that many of the businesses filing for Chapter 11 are real-estate related -- from developers to construction companies to property management firms.
In addition to increasing real estate-related filings, the Rockville court has seen a number of large, complex bankruptcy filings including Anton Motors Inc., Dart Drug Stores and the recent Chapter 11 filing of real estate investor Dominic F. Antonelli Jr.
The Rockville clerk's office has increased its staff from 18 to 25 in the last several years to meet the increased workload and is installing a new computer system, he said.
The caseload is not likely to abate if the number of January filings in Rockville are any indication.
For that month alone, the rate of bankruptcy filings was up 74 percent over 1990, Miller said.
The increase has meant many late-night bankruptcy court sessions. Because of that, an additional bankruptcy judgeship was authorized last year for both Maryland and Virginia.
Congress has yet to approve the funding for those or for the 12 other approved bankruptcy judgeships around the country.
"It may be years before they actually get those judges on the bench," said Ed Flynn, a management analyst for the Administrative Office of the U.S. Courts.
In the District's bankruptcy court, there have traditionally been fewer business bankruptcies simply because there aren't as many businesses as in the suburbs. But the District court has kept unusually busy in the last year with big, complex cases like those of Garfinckel's and National Bank of Washington.
Another reason filings in the District did not increase more than 2.4 percent, legal sources said, is that the District's bankruptcy judge, S. Martin Teel Jr., does not allow bankruptcy lawyers to "forum shop" by filing cases in his court that should be filed elsewhere.
While employees of the area's bankruptcy courts may feel overworked, they can be thankful that they aren't in some other part of the country. Although year-end figures on other regions are not yet available, projections for some northeastern states make the Washington area's figures seem low, said Flynn.
Through September of last year, bankruptcy filings were up 93 percent in New Hampshire, 87 percent in Massachusetts and 48 percent in Maine.
"They just went through the roof," said Flynn, who said he expects bankruptcies to be up an average of 15 percent throughout the country.
District of Columbia
Eastern Virginia District
NOTE: Total filings include personal and business bankruptcy filings under Chapters 7 and 13 of the U.S. Bankruptcy Code. Chapter 11 filings reflect primarily business bankruptcy filings. Eastern Virginia District figures from the Alexandria court; Maryland District figures from the Rockville court.
SOURCE: Administrative Office of the U.S. Courts