- The Washington Times - Thursday, May 15, 2003

ASSOCIATED PRESS

The record-setting pace of new personal bankruptcies continued this year, with their number rising 7.4 percent in the 12 months ended March 31, according to data released yesterday.

The upward trend was expected as effects linger from the consumer spending binge of the 1990s.

“There is still a big slug of individuals with problem debt still working their way through the [bankruptcy court] system,” said Samuel Gerdano, executive director of the American Bankruptcy Institute, a group of bankruptcy judges, lawyers and experts.

As is typically the case, most bankruptcy filings were by individuals.

The data compiled by the Administrative Office of the U.S. Courts show that new bankruptcy filings by individuals totaled 1,573,720 in the 12-month period — a new record — up from 1,464,961 in the 12 months ended March 31 last year.

While the number of personal bankruptcy filings and total filings rose, the number of new business bankruptcies actually fell 5.8 percent, to 37,548 from 39,845.

Total bankruptcy filings during the period rose 7.1 percent, from 1,504,806 to 1,611,268.

For the first three months of this year, total filings jumped to 412,968 from 379,012 in the same period last year.

Consumer debt has reached record levels in recent years. But Federal Reserve data 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 just 3.3 percent last year, a marked slowdown from the 6.9 percent increase posted the previous year.

The House and Senate last year approved legislation to overhaul bankruptcy laws to make it harder for people to erase debts in bankruptcy court, and President Bush signaled he would sign it. Sharp partisan differences over the abortion issue, however, doomed a House-Senate compromise in the lame-duck Congress in November. A similar bill overwhelmingly cleared the House in March, but the legislation faces less favorable prospects in the Senate. Banks and credit card companies have been pushing the legislation since 1997.

The new data showed that most filings during the 12 months ended March 31 continued to be under Chapter 7 of the U.S. Bankruptcy Code, which lets people dissolve credit card and other debts. Chapter 7 filings totaled 1,135,436, up 7.1 percent.

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, work tools and possibly some equity on their homes, depending on state laws. Property with value is sold to pay creditors.

The federal courts agency noted that no more bankruptcy judgeships have been created since 1992 to handle the increased workload. The bankruptcy overhaul legislation would authorize 29 additional permanent bankruptcy judgeships and seven more temporary judgeships.

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