Bankruptcies Increase Sharply as the Stigma of Filing Fades
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ACCELERATING a four-year trend of increasing numbers of bankruptcies in the state, residents and businesses have filed more than 18,000 bankruptcy petitions this year and are expected to file hundreds, perhaps thousands, more by the end of 1991, Federal Bankruptcy Court officials say. With a record number of petitions already filed — the vast majority for personal bankruptcy — experts say the trend is reflective of more than just the fallout from the nation’s vexing economic slump. The bankruptcies, they say, though typically precipitated by unemployment or reductions in income, are often more deeply rooted in the frenetic consumer borrowing that was encouraged by banks and credit companies during the 1980’s. That, they say, along with a lessening of the stigma associated with bankruptcy and increasing anger at the anonymous forces that have unbalanced many borderline budgets, has led a record number of people to seek the fresh start afforded by the bankruptcy laws. “It’s almost uncontrollable,” said Edward P. Bond, managing partner in the West Orange accounting firm of Bederson & Company, referring to the number of bankruptcies filed in recent years. “Today, every major accounting firm and law office has established a bankruptcy department,” Mr. Bond said, adding that in the past, bankruptcy work was often shunned by lawyers and accountants alike. “Now, my conception is that every attorney in the state has become a bankruptcy attorney,” he said. Mr. Bond said the effects of the current recession, coupled with tight credit, stretched budgets and diminished incomes, had created one of the most severe bankruptcy filing frenzies he had seen in 30 years in business. By the end of August, New Jersey residents and businesses had already filed nearly as many bankruptcy petitions as the total number filed in all of 1990. James J. Waldron, clerk of the United States Bankruptcy Court for the District of New Jersey, said that last year 15,394 bankruptcy petitions were filed by businesses and individuals in the state. By Aug. 31 of this year, Mr. Waldron said, 15,112 petitions had been filed. By Oct. 31, the number had risen to 18,783. By the end of the year, he said, the total filings are expected to exceed 20,000. “It’s impossible to react to that,” Mr. Waldron said, alluding to efforts of the Federal Bankruptcy Court in New Jersey to deal with the rising number of filings. “You just kind of scrounge around as best you can and put Band-Aids on the problems by processing paper.” With only seven Federal Bankruptcy Court judges assigned to New Jersey, the state desperately needs another judge, he said. “Our judges are overwhelmed,” he said. The vast majority of filings, Mr. Waldron said, are for personal bankruptcies. Through Oct. 31, for example, 1,085 businesses had filed while 17,698 personal bankruptcy petitions had been logged. In fact, while the number of business bankruptcies has remained fairly constant — averaging about 1,000 each year since 1985 — the number of personal bankruptcies has nearly tripled from a 1985 total of 5,977. That does not come as a surprise to bankruptcy experts. “It’s like buying a new set of clothes,” said Hugh M. Leonard, a lawyer with the Hackensack law firm of Cole, Schotz, Bernstein, Meisel & Forman. “It really should be a last resort, and for the most part it is, but there are some situations where it’s used in a turnstile approach.” Mr. Leonard, who was the United States Trustee for bankruptcy courts in New Jersey, Delaware and Pennsylvania, said the “turnstile approach” had been made worse, at least in part, by law firms that advertise for bankruptcy clients. “For the most part, I think they’re factories,” Mr. Leonard said. “You run into an office, you fill out the papers and you don’t really understand the consequences.” A major consequence, Mr. Leonard said, is that after a bankruptcy “it takes people a while to rehabilitate their credit.” Another, he said, is that those who file are effectively barred from filing another bankruptcy within six years. More : query.nytimes.com |