Bankruptcies forecast end of recession 

Bankruptcies hit a record high in San Francisco and San Mateo counties in June, one sign that the region is at the tail end of the recession.

Bankruptcy filings jumped from 3,226 in fiscal year 2008-09 to 4,841 in 2009-10 — a 50 percent increase, records show. That includes all chapters of personal and business bankruptcy.

Bankruptcy filings for the two counties increased by 35 percent from June 2009 compared with June 2010, the highest it has been since 1999, according to the United States Bankruptcy Court.

There were 440 filings in June 2010 compared to 370 in June 2009, records show. In addition, hotel defaults — when the borrower stops paying the lender — increased by 255 percent statewide since last year, putting them one step closer to bankruptcy, according to the San Francisco Center for Economic Development, which works to improve business climate.

“It’s simple: The recession is hitting small businesses and their reserves are being exhausted,” Small Business California President Scott Hauge said. “I don’t think we’ve seen the end of this — you will continue seeing increasing bankruptcies.”

Hauge noted that morale in the business community has hit rock bottom, as owners struggle to gain access to loans to help cover business costs. On top of that, businesses are being hit with increasing fees and pending tax increases, including a hotel tax increase that is slated for the Nov. 2 ballot.

Hauge pointed to a February survey conducted by Small Business California where 21 percent of the respondents said they do not believe they will be in business in the next three years.

“Clearly, small businesses are disheartened right now,” Hauge said.

Clifford Waldeck’s office-supply company, in business for 55 years in San Francisco’s Financial District, filed for Chapter 7 bankruptcy in March.

“I gave it my best shot,” Waldeck said. “But at the end of the day, you have to face reality.”

Local economists say while this number is high, there is little reason for alarm. In fact, they say this is actually good news. It is the natural cycle of a recession that starts with defaults on loans and ends with bankruptcies, economists say.

So by that thinking, Ryan Tabaldi, research analyst with the Center for Economic Development, said the high bankruptcy numbers prove the economy is on its way to recovery.

“The economy is shedding dead weight — businesses and industries that have been holding down the recovery,” Tabaldi said. “Weeding out these bad businesses provides more opportunity for good business to move forward.”

esherbert@sfexaminer.com

AP file photo

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