U.S. Bankruptcies Break Record
In Switch, Consumer Filings Rose in Late Summer

By: Caroline E. Mayer

Strapped by debt, Americans filed for bankruptcy protection in record numbers in the three months that ended Sept. 30.

Bankruptcies totaled 401,306 for the quarter, up 12% from the same period of last year, according to data released yesterday from the Administrative Office of the U.S. Courts.

The number of recent bankruptcy filings was up only 0.2% from the three months that ended June 30, when bankruptcies totaled 400,686. But even that slight increase worried bankruptcy experts, who noted that historically the number of filings usually declines in the late summer.

"I am a little surprised", said Samuel J. Gerdano, executive director of the American Bankruptcy Institute, a nonpartisan group that researches insolvency issues. "Last year we had a 10% drop between the end of June and the end of September. This reflects that the debt of the 90's is hanging over us. Consumer debt is very high, and families are under a lot of stress. They are living paycheck to paycheck and haven't saved, so when something bad happens that they haven't anticipated" there is no way out but bankruptcy protection. As long as consumer spending remains robust and personal savings stay low, more bankruptcies can be expected, said Gerdano, whose organization compiled the latest figures.

As usual, consumer filings accounted for the largest number of bankruptcies: 391,873 for the quarter, up 12% from 349,981 in the year-earlier quarter. Business filings, on the other hand, were down 1% from last year, to 9,433 from 9,537. Of all bankruptcies, more than 70% were for Chapter 7 - which allows consumers to cancel all their debts.

Locally, filings were up 7.1% in Northern Virginia, up 1.1% in Maryland and flat in the District.

The latest numbers will give more fuel to credit card firms and financial institutions that have been pressing to change the nation's bankruptcy laws to make it more difficult for debtors to file for bankruptcy and wipe out their debts. Such legislation, which has been considered by Congress in one form or another for the past decade, came close to passing this year until a last-minute squabble over a provision affecting abortion protesters.