Posted on Fri, May. 17, 2002
Bankruptcy filings jump 15%
SALES, DEALS LURE CONSUMERS INTO DEBT
By Marcy Gordon
Associated Press
WASHINGTON - Consumers spent so freely during the recession
that record numbers found themselves in heavy debt and filed for
bankruptcy.
Personal bankruptcy filings rose 15.2 percent to a total of 1,464,961
in the 12 months that ended March 31, the Administrative Office of
the U.S. Courts reported on Thursday.
Filings by businesses rose 10.7 percent to 39,845, including Enron's
on Dec. 2.
Individuals account for about 97 percent of all bankruptcy filings.
Consumers lured by sales, car deals and low interest rates spent
heartily, said Samuel Gerdano, executive director of the American
Bankruptcy Institute, a group of bankruptcy judges, lawyers and
experts. The strong spending helped make the recession shallow but
added to household debt, he said.
``Consumers did their part to make the recession a recessionette,''
he said. ``Consumers still have confidence in the economy.''
Gerdano noted that consumers were attracted by free-financing
deals on vehicles and that lower interest rates brought a surge in
mortgage refinancing that put more spending money in people's
pockets.
Consumers now are keeping the recovery on track. They shopped
with more gusto in April, pushing retail sales up by 1.2 percent, the
Commerce Department reported Tuesday.
The majority of consumer bankruptcy filings are filed under Chapter 7
of the U.S. Bankruptcy Code, which allows people to dissolve their
credit-card and other debts. Chapter 7 filings during the 12-month
period jumped 17.2 percent, to 1,059,777.
In return for having their debts erased, people in Chapter 7 cases
often turn their property over to a bankruptcy trustee, except for
basic 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 of the equity in their
home, depending on state laws.
By contrast, filings under Chapter 13 -- in which people repay debts
over time in accordance with a court-approved plan -- rose 10.2
percent to 433,107.
Both the House and the Senate have approved legislation that
would make it tougher for people to wipe out debt in bankruptcy.
President Bush has indicated he would sign it.
But Sen. Charles Schumer, D-N.Y., said Wednesday that the bill might
have to wait another year if Republican and Democratic negotiators
cannot soon resolve an abortion-related provision.
The bankruptcy legislation has been pushed for several years by
banks and credit card companies. Its supporters say stricter rules
are needed to stop abuse of the bankruptcy system by people who
can afford to pay their debts. |
