Personal bankruptcy filings fall 0.8 percent

ASSOCIATED PRESS

Personal bankruptcies have broken the upward trend of recent years, slipping 0.8 percent in the 12 months ending June 30, figures released yesterday show.

A specialist said the decline means that some consumers finally have been able to benefit from an improving economy.

New personal bankruptcy filings declined to 1.6 million, from the 1.61 million in the 12 months ended June 30, 2003, according to the data from the Administrative Office of the U.S. Courts.

"Consumer bankruptcy filings appear to have turned a corner," said Samuel Gerdano, executive director of the American Bankruptcy Institute, a group of bankruptcy judges, lawyers and other specialists. "While bankruptcies are still high compared to four years ago, improving economic conditions and low interest rates are permitting more families to clean up their household balance sheets."

Total bankruptcy filings, personal and business, edged down 0.9 percent to 1.64 million -- the first annual decline since 2000. The number of business bankruptcy filings declined for the second time since the previous reporting period, the 12 months ended March 31.

The number of bankruptcy filing had been rising in recent years, despite the improving economy. Experts blamed the increase on the lingering effects of the consumer spending binge in the 1990s and historically low interest rates that encouraged borrowing and household debt. The rate of bankruptcies also tends to lag direction changes in other economic indicators.

Economists say the decline in bankruptcy filings is likely to continue as the effects of tighter credit-granting standards and the improving economy are felt.

Legislation making it more difficult for consumers to erase credit card and other debts in bankruptcy court won speedy, overwhelming House approval in March 2003 and was endorsed by the White House. But the Senate has yet to act.

Banks, credit card companies and retailers say the legislation is needed to stop abuse of the bankruptcy system by people who can afford to repay their debts.

Consumer and civil rights groups and unions oppose the legislation, saying it is unfair to low-income working people, single mothers, minorities and the elderly and would remove a safety net for those who have lost their jobs or face mounting medical bills.

Opponents blame the credit card industry for much of the rise in personal bankruptcies, saying the issuers make credit too easily available and flood consumers with solicitations to open new accounts.