- The Washington Times - Saturday, February 15, 2003

Bankruptcy filings jumped to a record 1.58 million last year in a tepid economy, climbing 5.7 percent over 2001, according to data released yesterday.
The record-setting pace of new personal bankruptcies is expected to continue this year, said Samuel Gerdano, executive director of the American Bankruptcy Institute, a group of bankruptcy judges, lawyers and experts.
"With historically high levels of consumer debt and many … companies in financial distress, we expect 2003 to continue this pace," he said.
The data compiled by the Administrative Office of the U.S. Courts show that new bankruptcy filings in 2002 totaled 1.58 million, up 5.7 percent from 1.49 million in 2001 the year in which the economy slid into recession.
While total filings increased last year, the number of new business bankruptcies fell to 38,540 from 40,099 in 2001.
As is normally the case, most bankruptcy filings were by individuals. They increased to 1.54 million last year from 1.45 million.
In the last three months of 2002, total new filings soared 8.3 percent to a record 395,129, up from 364,921 in the fourth quarter of 2001.
Consumer debt has reached record levels in recent years. But data released by the Federal Reserve showed that consumers became more cautious users of credit last year, expanding their borrowing at the slowest pace in a decade.
The rise in credit-card and other revolving debt was the smallest increase since the Fed began keeping records in 1968.
Consumer borrowing rose by just 3.3 percent in 2002, a marked slowdown from the 6.9 percent increase posted in 2001.
The House and Senate last year approved sweeping legislation to overhaul bankruptcy laws to make it harder for people to erase debts in bankruptcy court, and President Bush has signaled he would sign it. Sharp differences over abortion, however, doomed prospects of a House-Senate compromise in November's lame-duck Congress.
The legislation, which banks and credit-card companies have been pushing since 1997, probably will be taken up again this year.
The new data showed most filings continued to be under Chapter 7 of the U.S. Bankruptcy Code, which allows people to dissolve credit-card and other debts. Chapter 7 filings last year totaled 1.11 million, up 5.2 percent from 2001.
In return for having their debts erased, people in Chapter 7 cases often turn over their property to bankruptcy trustees except for necessities such as a car, clothing and work tools. Property with value is sold to pay creditors. Debtors generally are allowed to keep some personal items and possibly some equity in their homes, depending on state laws.

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