Local bankruptcy filings down compared to 1999

The number of bankruptcies in Springfield and southwest Missouri has shrunk somewhat, "consistent with the national averages," said Judge Arthur Federman, chief bankruptcy judge for the Western District of Missouri.

"We're down between 5 (percent) and 10 percent, both nationally and locally, as far as the number filed," he added.

Federman said this decline is possibly the result of stricter lending standards on the part of banks and other credit-issuing institutions.

The total number of bankruptcy filings for Springfield and the 16-county Western District through September of this year is 1,700, said Roberta Kostrow, operations manager for the U.S. Bankruptcy Court in the Western District. Of these, 1,528 are Chapter 7, 15 are Chapter 11 and 157 are Chapter 13.

For 1999 the total number of filings was 2,272. Per chapter, the breakdown was 2,043 for Chapter 7, 25 for Chapter 11 and 204 for Chapter 13, she added.

While the filings are down from last year so far, bankruptcy remains a serious issue for all parties involved.

Launched as a government program after the Great Depression, bankruptcy law was designed to allow debtors to reorganize their debt when it became unmanageable.

Overwhelming medical debt, accident-related expenses or debt accruing from work layoffs were, and still are, common reasons for filing.

Today, however, bankruptcy is often used to eliminate massive credit card obligations or reduce the financial difficulties associated with divorce.

This has long been a concern of lenders.

"The abuse of the system anymore is just horrendous," said David Thater, senior vice president at Citizens National Bank of Springfield.

Thater said there were more than a million bankruptcies nationally last year, the result of "too many debtors taking advantage of a system that allows, essentially, legalized stealing," he added.

"From an economic standpoint, the advancement of civilization is dependent upon the velocity of money that's in circulation," Thater said. Dollars are removed from the economy through bankruptcy.

Reducing the number of times this money turns over in the economy, he said, "impedes economic progress and growth."

In the end, Thater added, people pay higher interest rates on credit cards "to make up for people who have decided to charge off $20,000 in unsecured debt and not be responsible for the debt they've incurred."

Some filers think they will be a better credit risk after going bankrupt and starting over.

"Actually, you're a good credit risk after you file bankruptcy," said Alan Suiter, co-owner of First Financial Consultants Inc., because credit issuers know an individual cannot again file for bankruptcy protection for seven years.

Thater, on the other hand, said the filer's credit is tarnished, even in the future.

As a result of bankruptcy, individuals won't be able to qualify for certain types of loans, and those loans they can access will probably have higher interest rates and a shorter loan period, he added.

However, the responsibility for bankruptcy is not necessarily limited to the debtor.

Raymond Plaster, a partner at Moon & Plaster law firm, said lenders should be more responsible in extending credit, and they should be "held accountable for the fact that they're throwing an awful lot of credit out there to people that shouldn't have it."