Bankruptcy filings increase at record pace during 2002

Bankruptcy filings broke the record for filings in any 12-month period, rising 15.1 percent in the 12-month period ending March 31, 2002, according to data recently released by the Administrative Office of the U.S. Courts. Filings rose from 1,307,857 in the 12-month period ended March 31, 2001, to 1,504,806 in the same period in 2002.

The total number of new bankruptcies filed during the first quarter of calendar year 2002 rose 3.3 percent, increasing from 366,941 to 379,012 over the same period a year ago. The new mark is the highest first quarter ever and the second-highest three-month figure in history.

In the Western District of Missouri, the total number of new bankruptcies filed during the first quarter of calendar year 2002 shot up 13.1 percent, increasing from 3,031 to 3,429 over the same period a year ago.

"The increase in bankruptcy filings has been fueled in recent months by the recent passage in the United States Congress of bills which would overhaul the bankruptcy system by making it difficult or even impossible for some people to file for bankruptcy," said Eric Farris, of the Branson law firm, Farris & Associates LLC, which has seen an increase in its bankruptcy practice the past two years.

"This legislation will make it more difficult for consumers to file for Chapter 7 bankruptcy, which lets them discharge credit card debt and other unsecured loans," said Farris. "More would have to file under Chapter 13, which can require stiff repayment schedules."

Farris said that more people who are having financial difficulties are filing bankruptcy now rather than risking the possibility that the coming restrictions on bankruptcy may drastically affect their options.

"The continued record-breaking pace of new bankruptcy filings will likely fuel new calls for legislation making bankruptcy less available," said American Bankruptcy Institute Executive Director Samuel J. Gerdano. "While the pending bill will ultimately reduce the scope of bankruptcy relief, in the short term it will push filings higher, as consumers race to take advantage of the current debtor-friendly law."