Bankruptcy Filings Jumped 24.5 Percent in Second Quarter, Hitting New Record
The Associated Press
WASHINGTON (AP) - Bankruptcy filings by American consumers and businesses jumped 24.5 percent in the April-June period, the Administrative Office of the U.S. Courts reported Friday.
There were 400,394 filings during the period, the highest quarterly total ever, up from 321,729 a year earlier.
Bankruptcy filings are now on track to surpass the record-breaking year of 1998, when 1,442,549 new cases were filed, according to the American Bankruptcy Institute, an independent group of bankruptcy judges, lawyers and experts.
In the first six months of the year, 767,235 new cases were filed, up 21 percent over the first half of 2000 and up 5.4 percent from the first half of 1998.
"The figures for the first half of this year are alarming, if not shocking," said Samuel Gerdano, the institute's executive director.
News of the increase comes as legislation is pending in Congress that would make it more difficult for people to erase credit-card and other debts in bankruptcy court. Similar versions of the legislation, the most sweeping overhaul of bankruptcy laws in 20 years, cleared the House and Senate earlier this year. Last month the Democratic-controlled Senate demanded negotiations with the House, where Republicans dominate, to craft a bill that President Bush would be willing to sign.
House and Senate negotiators are expected to begin working on a compromise after lawmakers return from their summer recess.
Bush, who supports a bankruptcy overhaul in principle, opposes a Senate provision that would cap at $125,000 the amount of home equity that debtors can keep out of the reach of creditors in court proceedings. The provision is designed to close a loophole in current law, the so-called homestead exemption, that allows wealthy debtors to shield their assets in luxury homes.
Proponents of the legislation have pointed to the surge in bankruptcy filings in recent years, when the economy was strong, as evidence of abuse of the system. Personal bankruptcies reached a record 1.4 million in 1998, up more than 300 percent since 1980, but declined to about 1.3 million in 1999 and 1.2 million last year.
Opponents say the legislation, coming amid a sagging economy, would remove a crucial safety net for people who have lost their jobs or face huge medical bills and for single mothers seeking child support from bankrupt fathers. They insist that credit card companies, mailing out millions of offers of new credit, have recklessly loosened their credit-granting standards and are at least partly responsible for the surge in consumer debt.
ap.tbo.com
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