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Experts: Drought Could Reverse Downturn in Bankruptcies

Greenberg Glusker Fields Claman & Machtinger LLP partner Brian Davidoff was quoted in an article that ran in the Los Angeles Daily Journal on July 31st about current predictions that the bankruptcy industry will soon see a spike in bankruptcy cases as a result of the state’s ongoing drought.

According to Davidoff, the bankruptcy industry has seen several years of declining filings as a result of high filing costs, low interest rates and a market that has been in recent years financially sound.

With the agricultural industry struggling from years of drought, many are predicting the next cycle of bankruptcies is on the horizon.

“The prices at which transactions are being done in real estate and in business is not sustainable, and when coupled with the tremendous amount of money out there looking for deals,” Davidoff said, “that’s usually a harbinger of a retraction.”

Davidoff also noted that looking at bankruptcy filings over the last few years did not raise significant concern as many lenders require farmers to carry crop insurance as a condition to making crop input loans.  Thus far, crop insurance has protected farmers from falling victim to the drought.  But long-term consequences could surface down the road.

“It’s a cumulative process … it takes a period of time before you start seeing the effects,” Davidoff said.