Bankruptcy Filings Headed Toward Historic Highs
Bankruptcy filings, led by over-extended consumers, are headed toward historic highs, with annual figures to be released in early March shattering the record.
Illinois bankruptcies through Sept. 30 were up 14 percent, and 98 percent of those filings came from individuals, according to the Administrative Office of the U.S. Courts. In Iowa, new bankruptcies in 2001 are projected to be up at least 33 percent over the previous year.
Credit cards are not the only culprit. A declining stock market as well as mortgages and big-ticket items bought during the free-spending 1990s are adding to the problem. Banks and other lenders enticed people with expanded credit limits, and now much of what consumers were encouraged to buy is no longer affordable as the economy contracts and layoffs rise.
"This is payback time for the '90s, when there was no delayed gratification," said Sam Gerdano, executive director of the American Bankruptcy Institute. "It was bigger, faster, we want it all now, and now the bills have come due. That's what we're dealing with here."
But as gloomy as the numbers are, economists and bankruptcy experts say the rising tide of bankruptcies is not a re-enactment of the sector-by-sector economic collapse of theI1980s, when the agriculture and manufacturing economies of the Midwest withered and bankruptcy filings soared at even higher rates than today.
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