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Personal bankruptcies down
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May 24, 1999: 4:08 p.m. ET
Fewer people in financial trouble, arresting a trend of excesses in good times
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NEW YORK (CNNfn) - Bankruptcies in the first quarter dipped to their lowest rate since 1996, the Administrative Office of the U.S. Courts showed in numbers released Monday.
The quarter ended March 31 saw 330,784 bankruptcy filings, down 6.3 percent from the previous quarter and a similar amount year over year, the office reported. That's the lowest number since the fourth quarter of 1996.
Bankruptcies have been trending higher, mainly thanks to leaps in personal bankruptcy. Aside from a modest increase in 1997, business bankruptcies have dropped each year since 1995.
All bankruptcies, personal and business, are filed in federal courts.
Coupled with decreases in credit-card delinquencies and increases in paying off credit-card debt, these numbers show more individuals are getting a handle on their financial problems, said Samuel Gerdano, executive director of the nonprofit American Bankruptcy Institute.
"It's a little too early to say it's the beginning of a long-term trend," Gerdano said, "but it's a favorable development."
Bankruptcies also were down for the 12 months ended in March, dipping 0.3 percent to 1.419 million. But that was mainly because business bankruptcies declined sharply, 21.9 percent.
Just 41,128 businesses filed for bankruptcy in those 12 months. "There's never been a number that low," Gerdano said. It follows a general trend that highlights both the health of the U.S. economy and a move away from bankruptcy to workout agreements with creditors.
Business bankruptcies run in tandem with the strength of the economy. But personal bankruptcies often increase when the economy is strong.
Heavy consumer spending boosts the government's statistical indicators, accounting for two-thirds of the U.S. economy. But heavy spending also gets more people in financial trouble.
"The good news is it drives the economy. The bad news is it adds to the household debt burden," Gerdano said.
He doesn't think the decline in personal bankruptcies spells bad news, though. Rather than turning off spending, more people are making use of low interest rates and increasing household incomes to pay off principal on debt and work out other problems.
There's one bankruptcy for every 70 households. "That's still too much," Gerdano said. But if there's another quarter like this, he said, 1999 is looking good. "This could arrest the trend of every year setting a new national record," he said.
-- by staff writer Alex Frew McMillan
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