Most of the people are filing because of a personal crisis, not because they are trying to abuse the system and walk away from their obligations, bankruptcy trustees and attorneys say. Many, however, saved little and used credit cards freely. The combination pushed them over the edge when they encountered an unanticipated crisis.
"There is an unforeseen event that comes into your life and it rocks your world," said David A. Rodgers, partner in Rodgers and Dickerson, a consumer bankruptcy law firm in Towson that has filed more than 22,000 personal bankruptcies since opening in 1990.
Nicholas J. Del Pizzo III, a bankruptcy attorney in Dundalk, said retirees from Bethlehem Steel Corp. are starting to trickle into his office. They lost their health care benefits, and their pensions were cut after the company filed for bankruptcy.
"A lot of these guys have long-term disabilities," Del Pizzo said. "They are paying for medication; they are paying for oxygen."
Herbert and Wanda Walker were living the American dream until Herbert Walker had to take early retirement in 2001 from Domino Sugar in Locust Point because of a knee problem.
In the good times, Herbert Walker, 64, made $100,000 running and maintaining machines that bagged sugar. The Walkers bought a 2000 Ford Explorer and a 2001 Ford Expedition. They took vacations to the Pocono Mountains in Pennsylvania and the Bahamas, and they owned shares in a wilderness camping resort in Virginia where Herbert Walker fished.
They had saved about $30,000 and had about $90,000 in a 401(k) plan.
"Things were going on beautifully," Herbert Walker said.
But the stock market plummeted, and his 401(k) was devastated, Herbert Walker said.
The Walkers, who have five children, two at home, live in a well-appointed rowhouse in West Baltimore. Now, with Herbert Walker out of a job, they live on about $24,000 a year, most of it from Social Security disability and retirement.
About a year ago, the Walkers fell two months behind on their mortgage and quickly sought bankruptcy protection.
"I panicked," said Wanda Walker, seated at her dining room table with a stack of financial documents organized in a thick, green binder. "The mortgage company sent a letter saying they were going to foreclose."
Wanda Walker, 42, tossed onto the table a stack of unfilled prescriptions for her husband's diabetes, knee pain, high blood pressure and "nerves." Herbert Walker said he had stopped going to the doctor.
"We used to have everything in the world," Herbert Walker said. "Now, we don't have nothing."
Although the recent growth in bankruptcy filings is extraordinary in historical terms, some experts say it is a natural consequence of a consumer-driven economy in which credit is easy and personal debt sets records every year.
While incomes have remained stagnant, savings have fallen and personal debt has grown, increasing the likelihood of personal financial disasters.
Household debt-service payments and financial obligations rose to 18.09 percent of disposable personal income as of June 30, up from 15.99 percent 10 years ago, according to the Federal Reserve Board.
Personal savings fell to $188.1 billion in last year's third quarter, down 26.6 percent from $256.3 billion in the third quarter of 1994, according to the Bureau of Economic Analysis.
The rise in bankruptcies has become accepted by policy-makers, banking regulators and even Federal Reserve Chairman Alan Greenspan, said Samuel J. Gerdano, executive director of the American Bankruptcy Institute.
"We are willing to accept it [rising bankruptcies] because that is just the way it is. It is a reality," Gerdano said. "Their view is that in a $9 trillion economy ... consumers do the heavy lifting. All of the policies are aimed at putting more money in people's pockets."
"There is not a lot of disposable income in the middle class anymore," said Rodgers, the bankruptcy attorney. "Jobs are being squeezed. Good jobs are being moved. The middle class is being squeezed."
Families, he said, have slipped into "financial bondage."
Like many middle-class people, Darlene Schapiro lives week to week, most of the money coming from Social Security payments she receives because she has dependent children and her husband has died.
A part-time office manager at a veterinarian's office, Schapiro lives on about $26,000 a year. She has relied on a dozen credit cards to pay for clothing, groceries and entertainment.
"It is very hard in today's society to truly live within your means," said Schapiro. "We all have champagne tastes on beer budgets."
Schapiro's husband died nine years ago. About five years ago, she began slipping into debt. Eventually, she took out a second mortgage on her Reisterstown condominium to pay off credit cards.
"I got to the point when I paid my credit cards I didn't have any money to live on," Schapiro said. "Mentally, I was trying not to face it."