Monday, November 17, 2003
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Figures Show Bankruptcy Filings Up Nationally, but Down by Nearly 7 Percent in Central District
By a MetNews Staff Writer
Bankruptcy filings in the Central District of California were down 6.7 percent in the 12 months ending Sept. 30, compared to the same period last year, figures released Friday show.
The local data, released by the Administrative Office of U.S. Courts along with statistics for all of the nation’s bankruptcy courts, stand in marked contrast with national figures.
Continuing the record-setting pace of recent years, bankruptcies rose by more than 100,000 nationwide to more than 1.661 million, including just under 80,000 in the Central District. Last year’s figures were just over 1.547 million nationally, with more than 84,000 in the Central District.
The increase in filings nationally was a product of an increase of more than 7 percent in personal bankruptcies, including wage earner plans. Business bankruptcies, in contrast, dropped from 39,000 to 36,000.
The American Bankruptcy Institute, in commenting on the AOCUS figures, noted that personal filings nationally have nearly doubled in the past decade in what observers have called an apparent hangover of debt from the free-spending 1990s.
The upward trend has continued despite signs of recovery in the economy as effects linger from the consumer spending binge of the 1990s and the historically low interest rates that encouraged borrowing. The rate of bankruptcies generally lags behind direction changes in other economic indicators, the ABI noted.
The filings “are being overwhelmingly driven by individuals with household debt,” Samuel Gerdano, executive director of the ABI, said in a release. “They do reflect the buildup of heavy consumer debt.”
Chief Bankruptcy Judge Barry Russell of the Central District agreed that consumer borrowing, particularly credit cards, drives the numbers.
Consumers, Russell told the MetNews, often leave themselves without much of a cushion. Unexpected occurrences, he said, tend to force them to seek relief through the bankruptcy system.
About 40 percent of personal filers, he said, have lost income through job loss or loss of overtime opportunities or similar circumstances. Others have had unexpected expenses, notably medical bills, the chief judge explained.
While filings dropped in the district for the second straight year, the trend is unlikely to continue, Russell said.
He noted that other western districts had results similar to the Central District’s, while East Coast districts saw increases. In the past, increases in the east have been followed by similar boosts in the west in subsequent years, he said.
“It’s really hard to say why,” Russell commented. Nor, he said, can he explain why the Central District, which used to account for a disproportionately high share of the nation’s filings, has now settled down to the point where it represents about 5 percent of the national filings, similar to its share of the population.
“I wish I were a sociologist,” Russell, a bankruptcy judge for 29 years, commented. He used to think that the “high-living” California lifestyle was to blame for the disproportionately high numbers, he said.
“I really don’t know” why the trend did not continue, he added.
He also expressed fear that interest rates will go up, leading to an increase in filings by debtors whose variable-rate mortgage payments are suddenly going to shoot skyward.
“We are going to be inundated with foreclosures,” he said, predicting “scary times.”
On another note, Russell said the district’s newest bankruptcy judge, Maureen Tighe, will be sworn in within two weeks and will begin drawing new case assignments Dec. 8.
He called Tighe’s appointment by the Ninth U.S. Circuit Court of Appeals “fabulous.” He described the judge-designate, a U.S. trustee since 1998 and former federal prosecutor as “a wonderful person, very bright, very conscientious.”
Tighe, he said, “really knows the bankruptcy system and the local bar.”
Copyright 2003, Metropolitan News Company