2002 Bankruptcy Filings Set Another Record

WASHINGTON-Jumping 7.7%, bankruptcy filings hit another record high in fiscal year 2002 (ending Sept. 30, 2002), according to the Administrative Office of the U.S. Courts. Both business and nonbusiness filings increased but personal filings lead the way with 8% growth. A total of 1,547,669 cases were filed in FY 2002, representing a 72.5% increase over FY 1993 when just 897,231 cases were filed. On the other hand, business filings in Chapter 12 dropped 15%, while Chapter 7 and 13 filings also fell 1% each. Chapter 11 filings rose 9% leading to a 2% increase in overall business filings. Nonbusiness bankruptcy filings increased for all chapters, including 32% under Chapter 11, 10% under Chapter 13, and 7% under Chapter 7 in FY 2002. “Although a pending bankruptcy bill in Congress may have encouraged some debtors to file bankruptcy petitions,” the report from the Administrative Office of the U.S. Courts read, “the overriding impetus for the increase most likely was high consumer debt combined with slow economic growth.” Demonstrating the courts’ overload, even though the courts terminated nearly 1.5 million cases last year, 1.6 million were still pending as of Sept. 30, 2002. The House of Representatives recently voted overwhelmingly in support of H.R. 975, the Bankruptcy Abuse Prevention and Consumer Protection Act of 2003, but the bill is expected to have a tougher ride in the Senate. In addition to the provisions that credit unions have supported from the beginning-means testing, mandatory financial education, and voluntary reaffirmations-a provision added this session would permit credit unions to participate in bilateral netting. Congressmen Pat Toomey (R-Pa.) and Brad Sherman’s (D-Calif.) amendment would allow credit unions being liquidated to pay the difference of funds owed between it and another financial institution rather than each institution paying the full amount. Senate Judiciary Chairman Orrin Hatch (R-Utah) is expected to introduce a similar bill soon. However, between the war in Iraq and Senator Charles Schumer’s (D-N.Y.) expected reintroduction of the abortion provision in the bill, progress in bankruptcy abuse reform in the Senate may get tied up. -