Bankruptcy Pace For Individuals Is Accelerating
When the nation's bankruptcy rate started to drop last year, John Garza felt the impact almost immediately. Business at his suburban Maryland bankruptcy law firm slowed so much that he was forced to let half of his 15 attorneys go, and several of the survivors quit in frustration over their reduced earnings. Mr. Garza, for his part, had time for other pursuits. "I played a ton a golf," he remembers.</br></br>These days, tee times are down and court time is up. The caseload of Mr. Garza's firm rose more than 15% last month alone, leading him to hire a new attorney. "We're like vultures perched on the telephone pole, waiting for the disaster so that we can eat," he says of his firm, which handles both personal and business bankruptcies. "Well, the vultures are about to spread their wings."</br></br>With interest rates up and the economy slowing, many households are discovering that their bills for years of torrid spending are coming due just as they are ill prepared to pay them. As a result, growing numbers of Americans are seeking court protection from their creditors. Personal bankruptcies, as measured by a 12-week moving average of filings, have increased nearly 10% since January. The moving average hit 24,288 for the week ending Nov. 4, up from 22,291 in the week ending Jan. 1, according to data from Visa.</br></br>Extended over an entire year, that pace would translate into about 1.26 million personal bankruptcy filings, a notch lower than the 1.28 million filings recorded last year. Indeed, after rising steadily for most of the past decade, personal bankruptcies fell in 1999 amid low interest rates and solid wage gains associated with the nation's ultratight labor market.</br></br>But what concerns many analysts is that the pace of bankruptcies appears to be accelerating. SMR Research Corp., a consumer-debt research firm in Hackettstown, N.J., estimates that bankruptcy filings will rise as much as 15% next year, easily surpassing 1998's record 1.4 million filings.