Bankruptcy Indiana

We've known the FDIC has been closing banks around the country, but the news struck close to home in the last two weeks.  Since one of my four Indiana bankruptcy law offices located in Columbus, it was a shock for me to learn that Irwin Bank has gone bankrupt.  Irwin Union Bank and Trust's and Irwin Financial's headquarters were both been in Columbus, Indiana, and their failure was the first bank failure for Indiana this year. All the deposits of the bank were assumed by First Financial Bank. 

Actually, Irwin Bank's fall didn't come as a total surprise.  Ohio-based First Financial had already bought Irwin's Carmel, Greensburg, and Shelbyville branches. This latest purchase included Irwin's 27 remaining branches, of which 12 are in Indiana.  As with any company or individual that files bankruptcy, Irwin's liabilities far exceeded its assets.  There may be as many as 1,000 different creditors involved in the estimated $100 million to $500 million of debt.

According to a story in the Indianapolis Business Journal, the FDIC will take a charge of $850 million as a result of the Irwin closure. What actually happens in a bank bankruptcy is that some of the assets are sold, as happened here.  However, the FDIC takes over the riskiest assets, those that no other institution wants to buy.  The deposits continue to be guaranteed for the bank's depositors - it's the investors (who owned stock in the bank) who are the losers. 

According to Dealscape blog site, the FDIC will end the year 2009 with having closed 167 banks nationwide, and is estimated to take $70 billion in losses due to failed banks over the next five years. That's not good news no matter where you live in the U.S.!