Jen10122
11-14-2003, 09:52 PM
WASHINGTON, D.C. -- Bankruptcies have nearly doubled in the past decade, including more than 1.6 million people who filed for personal bankruptcy this fiscal year alone.
Continuing the record pace of recent years, personal bankruptcies rose 7.8 percent in the 12 months ending Sept. 30, according to data released Friday by the Administrative Office of the U.S. Courts.
In Minnesota, personal bankruptcies rose 14.3 percent, to 10,345, in the first six months of 2003 compared with the same period the year before. Minnesota filings through June 2003, the latest figures available, were 20.5 percent higher than the comparable period in 2001.
The upward trend has continued despite signs of a recovering economy as effects linger from the consumer spending binge of the 1990s and the historically low interest rates that encouraged borrowing. The bankrupty rate generally lags behind changes in other economic indicators.
The filings nationally are being overwhelmingly driven by individuals with household debt, said Samuel Gerdano, executive director of the American Bankruptcy Institute, a group of judges, lawyers and other experts. "They do reflect the buildup of heavy consumer debt."
The total number of bankruptcy filings, including both personal and business, grew by 98 percent, to this year's 1,661,996 from 837,797 in fiscal 1994.
Wells Fargo & Co. Chief Economist Sung Won Sohn said bankruptcy rates have tended to rise because of three factors: attitudinal shifts, record consumer debt and the recession. The effects of a recession "generally extend into the early stages of an economic recovery," he said. Plus, cultural shifts have destigmatized the act of filing for bankruptcy, reducing feelings of shame -- especially among younger people, he said.
And we have the "near-record high consumer debt burden" among low-income residents. If they lose their jobs, Sohn said, they don't have stocks or home equity loans upon which to fall.
Nationwide, the rate of growth in new bankruptcies slowed somewhat in the July-September period of this year compared with the same period a year earlier. That is likely to continue as the effects of tighter credit-granting standards and the improving economy begin to be felt, some economists believe.
Employers have added workers in each of the past three months after many months of job losses.
"It's not surprising to see some sort of ongoing cleanup of credit problems even when the economy is on the mend," said economist Ken Mayland, president of ClearView Economics in Cleveland.
Mayland noted that credit standards were particularly lenient in the mid-1990s, which is still having an effect.
Legislation making it harder for consumers to erase their debts in bankruptcy court won speedy, overwhelming House approval in March and was endorsed by the White House. But the Senate hasn't acted and is unlikely to do so before recessing for Thanksgiving.
Staff writer Dee DePass contributed to this article
Continuing the record pace of recent years, personal bankruptcies rose 7.8 percent in the 12 months ending Sept. 30, according to data released Friday by the Administrative Office of the U.S. Courts.
In Minnesota, personal bankruptcies rose 14.3 percent, to 10,345, in the first six months of 2003 compared with the same period the year before. Minnesota filings through June 2003, the latest figures available, were 20.5 percent higher than the comparable period in 2001.
The upward trend has continued despite signs of a recovering economy as effects linger from the consumer spending binge of the 1990s and the historically low interest rates that encouraged borrowing. The bankrupty rate generally lags behind changes in other economic indicators.
The filings nationally are being overwhelmingly driven by individuals with household debt, said Samuel Gerdano, executive director of the American Bankruptcy Institute, a group of judges, lawyers and other experts. "They do reflect the buildup of heavy consumer debt."
The total number of bankruptcy filings, including both personal and business, grew by 98 percent, to this year's 1,661,996 from 837,797 in fiscal 1994.
Wells Fargo & Co. Chief Economist Sung Won Sohn said bankruptcy rates have tended to rise because of three factors: attitudinal shifts, record consumer debt and the recession. The effects of a recession "generally extend into the early stages of an economic recovery," he said. Plus, cultural shifts have destigmatized the act of filing for bankruptcy, reducing feelings of shame -- especially among younger people, he said.
And we have the "near-record high consumer debt burden" among low-income residents. If they lose their jobs, Sohn said, they don't have stocks or home equity loans upon which to fall.
Nationwide, the rate of growth in new bankruptcies slowed somewhat in the July-September period of this year compared with the same period a year earlier. That is likely to continue as the effects of tighter credit-granting standards and the improving economy begin to be felt, some economists believe.
Employers have added workers in each of the past three months after many months of job losses.
"It's not surprising to see some sort of ongoing cleanup of credit problems even when the economy is on the mend," said economist Ken Mayland, president of ClearView Economics in Cleveland.
Mayland noted that credit standards were particularly lenient in the mid-1990s, which is still having an effect.
Legislation making it harder for consumers to erase their debts in bankruptcy court won speedy, overwhelming House approval in March and was endorsed by the White House. But the Senate hasn't acted and is unlikely to do so before recessing for Thanksgiving.
Staff writer Dee DePass contributed to this article