U.S. bankruptcies jump 19 percent to new high
By Christine Dugas
USA Today
NEW YORK — Bankruptcy filings surged 19 percent to a record 1.5 million last year, as businesses and consumers struggled under heavy debt loads during the economic slowdown.
Advertiser library photo • Feb. 2, 2002
Consumer bankruptcies, which accounted for 97 percent of all filings, jumped 19 percent, while business bankruptcies rose 13 percent, according to data released yesterday by the Administrative Office of the U.S. Courts.
Ron Tubbs bought a file cabinet at American Classic Voyages' auction here this month and wheeled it past the USS Patriot, one of the cruise line's idled ships. American Classic was among 257 publicly traded U.S. companies to go bankrupt last year.
But filings by publicly traded companies soared 46 percent, to a record 257, the Federal Deposit Insurance Corp. says. Last year's filings by Enron, Pacific Gas & Electric, Reliance Group and Federal-Mogul rank among the 20 largest corporate bankruptcies.
Hawai'i was not spared from the effects of the growing bankruptcies of publicly traded companies: In October, cruise ship operator American Classic Voyages shut down operations, leaving more than 1,000 workers adrift.
For the year, more than 5,000 Hawai'i residents and businesses sought bankruptcy protection, pushing the number of filings to the third-highest year on record as financial troubles reached the crisis point for many after the Sept. 11 terrorist attacks.
But nationwide, bankruptcy filings got off to a quick start last year, in part because of a move in Congress to pass a bill that would have tightened federal bankruptcy law.
"The bill was on the fast track in the first quarter of the year, and many people were told to file because it was the last chance under the old law," says Samuel Gerdano, executive director of the American Bankruptcy Institute. As the year went on, the bill foundered, and it had less of an impact on filings.
Other factors fueling filings:
• Layoffs. The economic slowdown produced a spate of corporate downsizings. In addition, many workers who rely on tips and overtime saw their incomes shrink, says Stuart Feldstein, president of SMR Research in Hackettstown, N.J. And low interest rates and a stock market downturn hammered retirees who rely on interest income and earnings on investments.
• Debt pileup. "There was a massive consumer debt pileup in the 1990s," Gerdano says. "Now, the bill is coming due." Consumer debt totaled $1.65 trillion at the end of 2001, according to preliminary data from the Federal Reserve. The average U.S. household with at least one credit card had $8,562 in card debt in December 2001, up 3 percent over 2000, CardWeb.com reports.
• Terrorism. After the September terrorist attacks, commercial insurance premiums skyrocketed, and some sectors, such as tourism in Las Vegas, were hard hit.
