Record Number of Bankruptcies Are Filed in ’98

More Americans filed for bankruptcy in 1998 than ever before, but the rate of increase dropped from the previous year, federal court officials reported Monday.

More than 1.44 million bankruptcy petitions were filed last year--an increase of 38,000, or 2.7%, from the more than 1.4 million filed in 1997.

Bankruptcy filings in 1997 had risen 19% over the 1996 level.

The data from the Administrative Office of the U.S. Courts showed that 1.39 million individuals and 44,000 businesses sought protection from creditors in federal bankruptcy courts last year.

In 1997, about 1.35 million individuals and 54,000 businesses sought such protection.

Federal law provides various kinds of protection for debtors. The bankruptcy code’s Chapter 7 lets individuals keep certain belongings while selling off other property to repay creditors. Companies that file under Chapter 7 sell off all assets and cease doing business.

As in past years, most bankruptcy filings--1.03 million--were filed under Chapter 7 in 1998.

The code’s Chapter 13 lets debtors repay creditors in installments, in full or in part, over a period of years. Nearly 390,000 individuals and more than 8,200 companies filed under that chapter last year.

More than 7,500 businesses invoked the code’s Chapter 11 last year, which allowed them to reorganize and continue operations while devising a plan to pay off debts.

The bankruptcy code’s Chapter 12, designed to meet the needs of financially distressed family farmers, was used in 807 filings last year. That’s the lowest total in recent years, down from 949 in 1997 and 1,083 in 1996.