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Copyright 1999 Times Publishing Company
St. Petersburg Times
August 14, 1999, Saturday, 0 South Pinellas Edition
SECTION: NATIONAL; Pg. 1A
LENGTH: 784 words
HEADLINE: Across the nation, bankruptcy filings beginning to ebb
BYLINE: HELEN HUNTLEY
BODY:
In the first half of '99, filings were down nationally and in the Tampa Bay
area. Experts warn: The reversal may be temporary.
The nation's tidal wave of bankruptcy filings is losing momentum. Filings
declined both in the Tampa Bay area and nationally in the first half of 1999,
reversing a longtime trend.
But bankruptcy experts say the trend is too new to celebrate. It could be a
lull in the storm, since U.S. consumers are still more than $ 1.3-trillion in
debt.
Indeed, there are worries about what will happen if the economy slows, since
some of those debtors are one financial catastrophe away from a bankruptcy
filing.
"This is not a time to be popping champagne," said Samuel J. Gerdano, executive director of the American Bankruptcy Institute
in Alexandria, Va.
More than 10-million Americans have filed for bankruptcy protection in the
1990s, generating a business boom for
bankruptcy lawyers and cries for
reform from lenders who say it is too easy for borrowers to walk away from their
debts.
Through it all, the bankruptcy court's Middle District of Florida, which
includes the Tampa Bay area, has been one of the nation's busiest.
But now the trend to ever-increasing filings appears to be reversing. Compared
to the first six months of last year, 1999 filings are down 7 percent
nationally and down 4 percent in the Middle District.
"The pendulum swung way off in one direction and it's coming back the other way," said Ginnie Van Kesteren, a St. Petersburg bankruptcy lawyer.
Still, filings have fallen before, only to pick up steam again. Filings
declined in 1993 and 1994, then resumed their surge, hitting records in 1996,
1997 and 1998.
This year's falloff could reduce some of the pressure on Congress to make it
tougher for people to file, Gerdano said. Credit card companies and other
lenders want to force many people to sign up for debt repayment plans instead,
but
many consumer groups oppose the measure, saying few people who file have the
means to make repayment.
This year's trend is consistent with the improvement in other consumer finance
statistics. Delinquencies for mortgages, home-equity credit lines and car loans
all were down during the first quarter, as were credit card delinquencies in
dollar terms, though not in the number of accounts.
Lower unemployment rates mean more people can make their required loan
payments. Low interest rates also have allowed many to reduce their borrowing
costs by transferring debt from one credit card to another or consolidating
debt with a home equity loan.
The numbers show the situation's improvement. Through June 30, 21,442
bankruptcy cases were filed in the Middle District, 932 fewer than in the first
six months of 1998. That
includes 462 business filings, 145 fewer than last year.
Nationally, there were 676,740 filings during the first six months, 50,838
fewer than last year.
Still, many people remain a paycheck or two from financial disaster.
"In at least nine out of 10 cases, the reason (for bankruptcy) is too much
credit card debt and something has happened in their life: the loss of a job,
divorce or illness," said St. Petersburg bankruptcy lawyer Jay Verona.
"As long as banks continue to give credit cards out like candy, I don't think it
matters how good the economy is."
While bankruptcy no longer carries the social stigma it once did, it may be
losing some of its popularity as a quick fix for serious financial problems.
"Word is getting out that bankruptcy is
not always the answer and that it does have lasting repercussions," said Patricia Nurse, president of Consumer Credit Counseling of the Florida
Suncoast.
"Bankruptcy stays on your credit record for 10 years. That doesn't necessarily
mean you won't get credit, but your options will be limited."
At the same time, fewer people are coming to the counseling service for help
with their credit card debt, a trend she attributes partly to the popularity of
debt consolidation through home equity loans and mortgage refinancing.
The strong economy is also helping businesses stay in the black.
Another factor: More businesses may be negotiating settlements with their
lenders as an alternative to bankruptcy filings, Van Kesteren said. She has
seen a decline in real-estate-related filings, but bankruptcies by health care
companies are on the increase.
One
reason filings may be down is that so many people already have filed, Van
Kesteren said. The most popular type of bankruptcy filing - a Chapter 7
liquidation - is off-limits for six years after it is used to discharge debts.
"There is a limit to the total population," she said.
- Times staff writer Ameet Sachdev contributed to this report.
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