Posted on: Saturday, August 28, 2004

Bankruptcies decline for 1st time since 2000

Associated Press

WASHINGTON — Personal bankruptcies appear to have broken the upward trend of recent years, slipping 0.8 percent in the 12 months ending June 30, according to figures released yesterday.

New personal bankruptcy filings declined to 1,599,986 from 1,613,097 in the 12 months ending in June, according to the data from the Administrative Office of the U.S. Courts.

"Consumer bankruptcy filings appear to have turned a corner," said Samuel Gerdano, executive director of the American Bankruptcy Institute, a group of bankruptcy experts. "While bankruptcies are still high compared to four years ago, improving economic conditions and low interest rates are permitting more families to clean up their household balance sheets."

Total bankruptcy filings, personal and business, edged down 0.9 percent to 1,635,725 — the first annual decline since 2000. Business bankruptcy filings declined for the second time since the last reporting period, the 12 months ending March 31.

Bankruptcy filing had been on the rise in recent years despite the improving economy, which experts blamed on the lingering effects of the 1990s consumer spending binge and historically low interest rates.

Economists say bankruptcy filings are likely to keep falling with tighter credit-granting standards and the improving economy.

Legislation making it harder to erase consumer debt in bankruptcy court won speedy, overwhelming House approval in March 2003 and was endorsed by the White House. The Senate has yet to act.

Banks, credit-card companies and retailers say the legislation is needed to stop abuse of the bankruptcy system. Consumer and civil-rights groups and unions say it is unfair to low-income working people, minorities, single mothers and the elderly and removes a safety net for those who lose their jobs or face medical crises. They say credit-card issuers are partly to blame for making credit too easily available.