BY MAUREEN N. MARATITA
Guam’s bankruptcies figures are already high at the end of four months into the year. District Court of Guam
figures show 56 bankruptcies as of April 27 (See Chart on Page 35).
Mark Williams, attorney with The Dededo Law Office PC, told the Journal, “This year has shown an increase, as you can see from the 138 total cases which were filed for all of last year versus [the number] that have been filed for the first quarter alone in 2016.”
Williams said that was despite the fact that “bankruptcy filings leveled off annually after the 2005 ‘new’ bankruptcy law (with complex additional requirements that require extensive and professional auditing pre-filing).”
He was referring to the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. Prior to the act, total annual bankruptcy filings were in the high 300s from 2002 to 2005, according to Journal files, but the expectation that the act would make filing more complicated was partially responsible.
Williams is a member of the National Association of Consumer Bankruptcy Attorneys. “I do file at least 80% of
the bankruptcies on island, perhaps due to 20 years of experience,” he said.
The reasons for bankruptcies are varied, Williams said.
“Typically, bankruptcy filings arise out of the reduction of household income due to termination/layoffs, death of a breadwinner, divorce, catastrophic medical expenses which are not covered by insurance, or market or business downturns and conditions affecting both individuals and small businesses directly.
“The various Chapters of the Bankruptcy Code address the needs of the filer in terms of property and income, with specific considerations including whether to restructure a delinquent mortgage on a residence to stop a foreclosure, avoid certain judgments or liens on property, stop levies and garnishments on wages and personal or business bank accounts, lower payments on certain secured debts, or to continue to operate a business and reorganize, to cite just a few examples as part of the general intent to protect property and income from creditors.”
Bankruptcy filing by a business can require more varied considerations, William said.
“Business bankruptcies involve much more auditing and paperwork in accounting for the extensive current and prior years’ analysis, which is required to address business inventory, income, taxes, etc. And small-business owners, in particular, typically require extra consideration of personal guarantees that are usually present for business debts, and for business tax liabilities which can become personal liabilities under certain circumstances, and questions about the feasibility of maintaining business operations, reorganization or liquidation.”
Mark J. Heath is the Chapter 7 trustee in Guam.
He said his role is not to aid debtors. “That is the job of the debtors’ attorneys. My job is more to protect the integrity of the system to ensure that the debtors have followed all the rules. In a sense, I am working on behalf of the uninsured creditors,” he said.
Bankruptcy is the result of a variety of factors, he said. “The common causes of bankruptcy are divorce, health care costs that are uninsured, job layoffs and excessive spending.”
Heath is also the chief financial officer for Micronesian Registration Advisers Inc.
A Chapter 7 debtor turns over all nonexempt property to a trustee, who pays creditors. The debtor is discharged of all debts.
Commercial enterprises commonly file Chapter 11 bankruptcy petitions, which are also known as “reorganization” plans. Companies may continue to operate their businesses.
A Chapter 13 debtor is allowed to keep property and pays debts over time, usually three to five years. It is also called a wage earner’s plan. Chapter 13 is strictly for individuals or individuals who run businesses and not for business entities.
Chapter 12 is similar to Chapter 13 but available only to farmers and fishermen and offers them certain benefits in certain circumstances. mbj