Study Sees Personal Bankruptcy Filings Leveling Off

Personal bankruptcy filings, which have grown to record levels in recent years, will level off this year and decline in 1999, according to a study released this week.

The decline in filings reflects a drop in interest rates, which has enabled consumers to refinance debt at lower monthly payments, according to the study by SMR Research Corp. of Hackettstown, N.J.

But it warns that the root causes of the boom in bankruptcies--such as too much debt--continue to worsen.

“Bankruptcy remains a serious problem,” said Stuart A. Feldstein, president of SMR Research. “Other than interest rates, all the other basic drivers behind bankruptcy look worse. When rates rise again, we’ll probably see record bankruptcy filings again.”

The SMR warning is in line with projections released earlier this month by Visa USA, the brand with the largest number of credit cards. Visa said that despite slower growth during the first six months of this year, total personal bankruptcy filings will hit a new high of 1.35 million in 1998 and continue growing to 2.2 million a year by 2001.

In 1997, an all-time high of 1.33 million personal bankruptcies were filed in the United States.

SMR forecasts that the growth rate will flatten this year, with total filings of between 1.25 million and 1.35 million, and decline next year to between 1.15 million and 1.28 million. Those estimates will be lowered if tougher bankruptcy legislation currently before Congress is passed, Feldstein said.

Total home mortgage debt in the U.S. exceeds $4 trillion. All other consumer debt combined, including credit cards, auto loans and mobile home loans, comes to less than $1.3 trillion, SMR figures show.

Personal bankruptcy filings began to climb in 1984, when they reached 282,105. They increased steadily to 893,248 in 1992, then declined 13% to 773,111 in 1994.

Proposed federal legislation could cut down on bankruptcy filings, SMR said.

A bill passed last month by the House would require bankruptcy filers above a certain income level to pay back at least part of their debts rather than having them all dismissed. Prospects are unclear for a milder measure pending in the Senate.