Bankruptcies nearly double

An Associated Press story, appeared in the Deseret Morning News on November 15, 2003, indicating bankruptcies have nearly doubled in the past decade. That includes more than 1.6 million people who filed for personal bankruptcy because of debt from the free-spending 1990s.

The filings "are being overwhelmingly driven by individuals with household debt," said Samuel Gerdano, executive director of the American Bankruptcy Institute, bankruptcy judges and other experts. "They do reflect the buildup of heavy consumer debt."

The total number of bankruptcy filings, including personal and business, grew by 98 percent, to this year's 1,661,996 from 837,797 in fiscal 1994.

"It's not surprising to see some sort of ongoing clean up of credit problems even when the economy is on the mend," said economist Ken Mayland, president of ClearView Economics in Cleveland.

Mayland noted that credit standards were particularly lenient in the mid-1990s, a factor that has had an impact for years afterward.

Legislation making it harder for consumers to erase their debts in bankruptcy court won overwhelming House approval in March of 2003 and was endorsed by the White House. Proponents of the legislation said it is needed to stop abuse of the bankruptcy system by people who can afford to repay their debts. Banks, credit card companies and retailers, who have pushed for such legislation since 1997, contend that abuse creates a hidden tax of about $400 a year on every American family through higher interest rates and other charges passed on to consumers.

Consumer and civil rights groups and unions oppose the legislation, saying it is unfair to low-income working people, single mothers, minorities and the elderly and would remove a safety net for those who have lost their jobs or face mounting medical bills. Opponents blame the credit card industry for much of the rise in personal bankruptcies, saying the issuers make credit too easily available and flood consumers with solicitations to open new accounts.