Jessica Gabel comments on rise in Chapter 7 bankruptcy filings in north Georgia

Posted On January 10, 2010
Categories Faculty, News, Uncategorized

ATLANTA — Georgia State University College of Law Professor Jessica Gabel told the Atlanta Journal-Constitution that a recent rise in Chapter 7 bankruptcy filings in north Georgia highlights the continued drag of the recesssion.

According to the July 30 article by Péralte C. Paul, Chapter 7 bankruptcy filings, in which companies liquidate completely or consumers give up trying to pay their debts, soared 60 percent in north Georgia during the first six months of this year, compared with the same period in 2008. Total bankruptcy filings increased more than 34 percent during the six months — from 18,124 to 24,328 — according to U.S. Bankruptcy Court for the Northern District of Georgia, the article states.

Retailers, Gabel said, get short-term financing from companies like CIT to buy the goods now that they’ll be putting on store shelves for the holiday selling season. If they can’t get that financing, they won’t order as much, resulting in lower sales, Paul wrote. “If you’ve got a lackluster holiday season and this correlating line of people not having the money to buy goods, what we could see is a secondary downstream effect of retail bankruptcies,” Gabel said. “It’s all tied together — the factory orders go down and the factory doesn’t need as many workers and it all starts all over again with another cycle of layoffs.”

Under bankruptcy law, if a business thinks it can survive, it may seek Chapter 11, which protects it from creditors while it reorganizes. The firm can later convert to Chapter 7 if the reorganization fails, according to the article.

Read the full article.