Bankruptcy Filings Soar to Record High : Economy: Personal Chapter 7 declarations increased 10% in 1990. Officials say easy access to ‘plastic,’ less stigma over the process, layoffs and medical emergencies contributed.

The recession and the consumer’s love affair with easy credit have combined to raise bankruptcies in Ventura County to record levels, court officials and attorneys handling such cases report.

Led overwhelmingly by personal Chapter 7 cases, filings of federal bankruptcy petitions in the county totaled 1,450 in 1990--an increase of more than 10% over the previous year.

Furthermore, although there is some hope among county business leaders of an economic upturn due to the cease-fire in the Persian Gulf War, the current pace of bankruptcies is accelerating.

According to U.S. Bankruptcy Court data, 41% more Ventura County individuals and businesses filed bankruptcy in the final three months of 1990 than in the first three months of the year.

Those tossing in the financial towel cover a wide economic spectrum--from an Agoura Hills couple with a half-million-dollar residence and a $20,000 BMW to a divorced mother in Oxnard who is unemployed, has virtually no assets and owes more than $10,000 in credit-card debts.

Perhaps the best-known county residents to have filed bankruptcy petitions recently are Ventura County Community College District Trustee James T. (Tom) Ely and his wife, Ingrid, whose financial problems include $50,000 owed to Nevada gambling casinos and more than $41,000 in credit-card debts.

Across the nation, others who have sought protection from their creditors under the Bankruptcy Code in recent years include Texaco, Continental Airlines, retailing giant Carter Hawley Hale, silver speculator Nelson Bunker Hunt and even a former secretary of the Treasury, John B. Connally.

Filings by these large corporations and celebrities probably have helped fuel the practice by reducing the stigma of bankruptcy in many people’s minds, attorneys specializing in the field say.

The U.S. Bankruptcy Court’s Central District, a seven-county area that includes Los Angeles and Ventura counties, is considered the nation’s bankruptcy capital. The 59,131 petitions filed in the district in 1990 represented a 10.3% increase over the previous year and were the most recorded in any court district in the nation.

The court does not normally break out figures for individual counties, but the total for Ventura County in 1990 indicates an increase that is probably in line with Southern California as a whole, attorneys and court officials said.

California, in fact, is well ahead of the nation as a whole in bankruptcy activity. Nationally, one household in every 138 is in bankruptcy; in California, the figure is one in 105.

“My calls and business have really heated up in the last six or seven months,” said Don M. Scott, a Ventura attorney who devotes much of his practice to bankruptcy matters. “I noticed a sharp rise in inquiries around the middle of last summer.”

Most of the increase is due to layoffs related to defense cutbacks and the recession, Scott said. Medical emergencies also force many people into bankruptcy, he added. And he placed much of the blame on the so-called plastic society.

“I’m seeing two-income families with up to 10 different credit cards. If you’re middle-class and have reasonably good credit, unsolicited cards arrive in the mail all the time.”

Besides using the cards to make unneccessary purchases, Scott said, “many people make matters worse by borrowing more than they should at the automated teller machines. If your line of credit isn’t used up, you can borrow against the rest of it at the machines.”

As an example of how the bankruptcy laws work, Scott cited a couple that he recently guided through the process.

“The wife worked part time and the husband full time. They owned a home and had two cars, both two years old, that were worth $8,000 and $6,000 each.

“They’d been using credit cards regularly for 15 years but had always managed to keep up with their payments.

“They were doing all right until their daughter was badly hurt in an auto accident. They had poor health-insurance coverage, and the expenses put them so far behind they had no real hope of catching up.”

The daughter recovered, but her parents felt that bankruptcy was the only way they could hold off their creditors. With Scott’s help, they filed a Chapter 7 petition listing their debts and assets.

Such a petition, if approved by the court, liquidates a person’s debts while allowing the debtor to hold onto certain exempted property such as furniture, a house and a car that’s needed to get to work.

In the couple’s case the court allowed them to keep both cars and their house. The debts on these items were refinanced to lower the payments. All other debts were discharged.

At a hearing in the County Government Center in Ventura, none of the couple’s creditors showed up to contest the figures in the petition.

“Frankly, I’ve never known Visa or the other credit-card companies to show up,” Scott said. “Unless it’s a really big case, they simply write it off and charge it to the cost of doing business.”

The couple’s bankruptcy will, of course, be recorded by credit-reporting agencies, Scott said. “They’ll have a hard time re-establishing their credit.”

In contrast, Scott recalled one real-estate speculator--not a client of his--who managed to finance millions of dollars worth of property little more than a year after going bankrupt.

According to the court, 89.7% of last year’s cases in Ventura County were personal matters filed under Chapter 7. Another 8% were Chapter 13 filings, which adjust but don’t necessarily liquidate the debts of people with regular incomes.

Only 2.3% of the petitions were filed under Chapter 11, which is generally used to reorganize the debts of a business.

Martin A. Rechnitzer, a Ventura attorney who until last October was a U.S. bankruptcy trustee conducting hearings in Ventura County, said that in Los Angeles and other large cities, Chapter 11 normally accounts for about 10% for all filings.

“It may be lower here because Ventura County businesses tend to call it quits rather than reorganize when they’re in trouble,” he said.