By MARCY GORDON The Associated Press Friday, November 14, 2003; 7:01 PM WASHINGTON - Bankruptcies have nearly doubled in the past decade, including more than 1.6 million people who filed for personal bankruptcy this fiscal year alone in a hangover of debt from the free-spending 1990s. Continuing the record-setting pace of recent years, personal bankruptcies rose 7.8 percent in the 12 months ending Sept. 30, according to data released Friday by the Administrative Office of the U.S. Courts. The upward trend has continued despite signs of recovery in the economy as effects linger from the consumer spending binge of the 1990s and the historically low interest rates that encouraged borrowing. The rate of bankruptcies generally lags behind direction changes in other economic indicators. The filings "are being overwhelmingly driven by individuals with household debt," said Samuel Gerdano, executive director of the American Bankruptcy Institute, a group of bankruptcy judges, lawyers and other experts. "They do reflect the buildup of heavy consumer debt." The total number of bankruptcy filings, including both personal and business, grew by 98 percent, to this year's 1,661,996 from 837,797 in fiscal 1994. However, the rate of growth in new bankruptcies slowed somewhat in the July-September period of this year compared with the same period a year earlier. That is likely to continue as the effects of tighter credit-granting standards and the improving economy begin to be felt, some economists believe. Employers have added workers in each of the past three months after many months of job losses. "It's not surprising to see some sort of ongoing cleanup of credit problems even when the economy is on the mend," said economist Ken Mayland, president of ClearView Economics in Cleveland. Mayland noted that credit standards were particularly lenient in the mid-1990s, a factor that has had an impact for years afterward. Legislation making it harder for consumers to erase their debts in bankruptcy court won speedy, overwhelming House approval in March and was endorsed by the White House. But the Senate hasn't acted and is unlikely to do so before recessing for Thanksgiving. Proponents of the legislation say it is needed to stop abuse of the bankruptcy system by people who can afford to repay their debts. Banks, credit card companies and retailers, who have pushed for such legislation since 1997, contend that abuse creates a hidden tax of about $400 a year on every American family through higher interest rates and other charges passed on to consumers. Consumer and civil rights groups and unions oppose the legislation, saying it is unfair to low-income working people, single mothers, minorities and the elderly and would remove a safety net for those who have lost their jobs or face mounting medical bills. Opponents blame the credit card industry for much of the rise in personal bankruptcies, saying the issuers make credit too easily available and flood consumers with solicitations to open new accounts. --- On the Net: Administrative Office of the U.S. Courts: http://www.uscourts.gov American Bankruptcy Institute: http://www.abiworld.org © 2003 The Associated Press Historically low rates, but bankruptcies at higher levels. What would happen when rates start creeping up thus placing additional burden on debt service requirements? Can the fed maintain these low levels much longer, or additional USD devaluation is the answer?
It is no surprise in country that itself is bankrupt. They just keep printing money - increasing money supply - but there is absolutely no value behind the paper being printed. Watch out below, when someone finally announces "The King has no clothes".
certainly the number of bankruptcies has increased, as has the number of households. the question is whether the number has changed relative to the number of households. I don't agree that the country is 'bankrupt.' there are tremendous assets here, and I doubt that they are outweighed by our liabilities. I certainly would like to see the liabilities be retired, in part at least. And yes, they do 'print money.' money supply expands. it also contracts. that itself is no sin.
True. But reading "WASHINGTON - Bankruptcies have nearly doubled in the past decade, including more than 1.6 million people who filed for personal bankruptcy this fiscal year alone in a hangover of debt from the free-spending 1990s. Continuing the record-setting pace of recent years, personal bankruptcies rose 7.8 percent in the 12 months ending Sept. 30, according to data released Friday by the Administrative Office of the U.S. Courts." For the normalized bankruptcy rate to stay unchanged, it would imply that the number of new households was up 7.8% in 1 year or it has doubled the last decade. Isn't % new households about equal to population increase %wise?. Haven't seen the latest numbers, but it's doubtful that US population has doubled the last decade or has increased 7.8% the last 12 months.
... is what the headlines ought to read. If there were 1 mil household bankruptcies last year, and 2 million this year, there is a 100% increase in household bankruptcies. However, if the number of households increased from 10 mil to 20 mil, then the net increase in household bankruptcies is zero. No news. A non-issue. The number needs to be clarified before the conclusion implied by the piece can be verified. I don't doubt that bankrupticies are up net. But there are alot more players in the field as well, so the net may not be as dramatic as it seems. Also, given the recession we've just come out of, and especially the boom we've come out of, it's not surprising or alarming that the marginal players, those without any real value added to the real economy, are forced out of the competition for business. "The Trouble with Prosperity" is an excellent book by James Grant that discusses this, the uncomfortable side of the business cycle.
I would expect personal bankruptices to have increased over the last 2 years. A pattern which is coincident with the latter stages of a recession and which in this case differs in that households accumulated more debt in the latter stages of the prior boom. With overcapacities still being wrung out of some industry sectors we can expect the BK rate to stay realtively high for a bit longer as workers displaced by overcapacity issues migrate to new jobs - which of course requires an uptick in hiring and job creation.
Agreed, if ones assumes that the number of households has doubled the last 10 years. But you'll have to consider that % increase in households, roughly equates to same % increase in population. Unless this assumption is completely off base, for the news to be Non-Issue, it would imply that US population has doubled the past decade. That is very doubtful, and thus the news is far from non-issue. However; better base numbers are needed to assert the normalized per household increase in bankruptcies.
I am sure the net number of households has increased more and faster than one might have considered, but I have no basis to claim that it has doubled. The ultimate point, however, is that bankruptcies follow booms like flowers follow rain in the spring.
From US Census Bureau. US population estimate 11/18/2003 292,622,532 http://www.census.gov/main/www/popclock.html Historical data closest to 1994 is 1990, 04/01/1990 recorded population size 248,709,873 http://www.census.gov/population/censusdata/table-2.pdf 1994 interpolation should be somewhere between these 2 numbers. Roughly 265-270 million. Using the lower number to account for max population increase between 1994 to 2003, we get 10% population/household increase, and that's on the safe high side. During the same time period we have 100% bankruptcy increase.