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Nationwide
bankruptcy rate
drops for 2nd year

The state also enjoyed
two straight years
of lower filings

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From staff and wire reports

WASHINGTON -- The number of U.S. individuals and businesses filing for bankruptcy fell for the second year in a row in 2000, according to data released today by the Administrative Office of the U.S. Courts.

The total number of bankruptcies filed during 2000 was 1.25 million, down 5 percent from the 1.32 million filed in 1999 and more than 13 percent from the record high of 1.44 million reached in 1998. Filings in the fourth quarter of the year totaled 310,169, down 3 percent from the same period in 1999 though up slightly from 308,718 in the third quarter.

Hawaii, likewise, had a sharp decline in the number of bankruptcy filings in 2000 for the second year in a row. Total statewide bankruptcies fell 16 percent to 4,527 from 5,411 in 1999. The 1999 total was a 7 percent drop from the year before.

However, the declines followed years of skyrocketing local bankruptcies. Hawaii bankruptcy filings hit a peak of 5,813 in 1998. And despite the subsequent declines, 1999 and 2000 had the second- and third-highest total local filings, respectively.

Economists generally linked the high bankruptcy rates to the state's stagnant economy through much of the 1990s, mounting credit card bills, and the ease of wiping out debts by filing for bankruptcy.

Spurred by a steep national rise in filings during the 1990s, Congress has been grappling with an overhaul of the bankruptcy code and is moving quickly to pass legislation to make it harder for individuals to wipe out their debts.

But consumer bankruptcies -- the focus of that effort -- have now been on the decline for two years, falling 5 percent in 2000 to 1.22 million from 1.28 million in 1999. Over the fourth quarter, personal bankruptcies rose slightly to 301,756 from 300,507 in the prior quarter. Congressional efforts have focused on making debtors judged able to repay some of their debts do so by bringing them under Chapter 13 of the bankruptcy code rather than Chapter 7.

In Chapter 7, individuals are allowed to liquidate their assets and wipe out unsecured debts, such as credit card bills. Chapter 13 plans require them to pay back some of those debts.

According to the Administrative Office, the number of Chapter 7 bankruptcy filings fell 7 percent in 2000, while Chapter 13 bankruptcies rose by just under 1 percent. Chapter 11 filings, which facilitate business reorganizations, increased 6 percent over the year.

The bankruptcy overhaul easily cleared both the House and Senate last year, but was blocked by former President Clinton, who said it would be too harsh on struggling debtors. But with the new Bush administration signaling support for the Republican-led effort this year, its backers are eager to move the reintroduced, identical measure quickly through Congress.

Congressional leaders have indicated the bill could come up for votes in both the House and Senate as early as next week.