Bankruptcy filings reach 3-month high

Posted: Thursday, January 02, 2003

WASHINGTON (AP) -- Bankruptcy filings by individuals and businesses jumped 12 percent in the three months ending in September to a record 401,306, according to data released Monday.

New bankruptcy filings in the 12 months ended Sept. 30 totaled 1,547,669, up 7.7 percent from the year-earlier period and exceeding the record high of 1,492,129 in 2001, a year in which the economy slid into recession, data compiled by the Administrative Office of the U.S. Courts show.

The American Bankruptcy Institute, a group of bankruptcy judges, lawyers and experts, said the filings surged 30 percent from the third quarter two years earlier.

They reflected ''the hangover of debt built up during the 1990s,'' said Samuel Gerdano, the institute's executive director.

As is normally the case, most bankruptcy filings were by individuals: 391,873 in the July-September quarter and 1,508,578 in the 12-month period.

The House and Senate last year approved sweeping legislation to overhaul bankruptcy laws to make it harder for people to erase debts in bankruptcy court, and President Bush has signaled he would sign it. Sharp partisan differences over abortion, however, doomed prospects of a House-Senate compromise in this month's lame-duck Congress.

The legislation, which banks and credit card companies have been pushing since 1997, probably will be taken up again next year, when Republicans will control both houses of Congress.

The new data showed most filings continued to be under Chapter 7 of the U.S. Bankruptcy Code, which allows people to dissolve credit-card and other debts. Chapter 7 filings in the third quarter totaled 280,999, up 12.2 percent from a year earlier.

In return for having their debts erased, people in Chapter 7 cases often turn over their property to bankruptcy trustees except for 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 equity in their homes, depending on state laws.


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