2.5% Rise in Personal Filings Pushes Bankruptcies to New High

Total bankruptcies nationwide hit a record high in the second quarter, apparently boosted by a flurry of personal filings by people who fear imminent changes in the bankruptcy law.

Business bankruptcies continued to decline, but personal bankruptcies, which account for 97% of the filings, edged up 2.5% from the second quarter a year earlier. That pushed the total number of bankruptcy filings to 373,460 in April, May and June, surpassing by nearly 2% the previous high posted in the second quarter of 1997, federal court officials said this week. California’s figures mirrored the nationwide trend.

Although a 2% rise is not large, given the steady and previously sharper increases in bankruptcies in recent years, analysts were still surprised by the continuing uptick in personal filings. The economy remains relatively strong and consumer delinquencies in general have come down in recent quarters while some lenders have tightened their credit standards.

But bankruptcy attorneys and other experts said some consumers were being prompted by pending bankruptcy reform legislation, which could take effect as early as the fall and is expected to make it tougher for consumers to extinguish their debts.

Indeed, attorneys are advising their clients that they may want to take advantage of the current law while it is still available.

“I’m telling clients that it might very well end up being harder to file for bankruptcy,” said Joseph Weber, a bankruptcy lawyer in Costa Mesa. Weber added that he also thinks a “false optimism” is adding to the number of bankruptcy petitions. “When they perceive the economy to be better, some spend beyond their means,” he said.