Personal bankruptcy filings are declining, data show

U.S. court figures indicate Chapter 11 cases rose 4.2%

August 28, 2004|By BLOOMBERG NEWS

WASHINGTON - Bankruptcies, dominated by personal filings, fell by about 1 percent in the year that ended June 30, with business bankruptcies falling almost 4 percent, the Administrative Office of the U.S. Courts said yesterday.

The drop, to 1.63 million from 1.65 million bankruptcies of all kinds, is the first since 2000 for the 12-month period, the administrative office said. Four years ago, in the corresponding period, there were 1.27 million filings, the office said.

Filings for personal bankruptcy for the period declined from 1.61 million in 2003 to 1.59 million in 2004.

"Consumer bankruptcy filings appear to have turned a corner," said Samuel J. Gerdano, executive director of the American Bankruptcy Institute in Alexandria, Va. "Improving economic conditions and low interest rates are permitting more families to clean up their household balance sheets."

Economist Lakshman Achuthan, managing director of Economic Cycle Research Institute in New York, said the number of bankruptcies might increase in the future because of slowing economic growth. "The pace of growth is throttling back. Some of the best news on the bankruptcy front may be behind us."

The cost of food and energy, including gasoline, and other "clouds on the horizon" may increase the filing rate, he said.

Filings under Chapter 11 of the federal bankruptcy law, which allows a business hampered by debt to continue operating under court supervision, rose 4.2 percent to 11,048, the report said. Chapter 7 cases, named after a section of the law that provides for liquidation of personal and business assets, rose 0.10 percent to 1.16 million.

But total business bankruptcies, including Chapter 7 and Chapter 11, fell from 37,182 to 35,739. The number of public companies filing for Chapter 11 protection during the period fell from 99 to 51, according to figures from BankruptcyData.com, which tracks such data.

Bankruptcy courts in the Southern District of New York logged the highest percentage increase of total filings, 18.4 percent, in the year that ended June 30, the court administrative office said.

The largest corporate bankruptcy in the 12-month period was that of Mirant Corp., an energy producer that listed $19.4 billion in assets in its filing July 14, 2003, according to Christopher Stuttard of BankruptcyData.com. The second largest was that of Trenwick Group Ltd., an insurer listing $5.3 billion in assets on Aug. 20, 2003, when it sought court protection.

WorldCom Inc., which filed the largest bankruptcy in U.S. history in July 2002 after disclosing misstatements of its finances, completed its reorganization in April, emerging as MCI Inc. Enron Corp. which filed the second-largest U.S. bankruptcy in December 2001 after admitting fraudulent accounting, plans to complete its reorganization later this year.

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