Bankruptcies Reach Record High

ByABC News
August 14, 2002, 3:51 PM

Aug. 15 -- Susan Laskowski is one of a growing number of Americans who have declared bankruptcy.

Laskowski, a teacher who lives in Santa Fe, N.M., decided to declare Chapter 7 bankruptcy last October after racking up $80,000 on credit cards she used to help pay for moving costs, living expenses and doctor bills over the previous 12 years.

Now almost a year later, Laskowski is back on her feet, making a salary of $48,000. She has just one Mastercard bill she says she uses in emergencies, two outstanding store loans that she did not claim in her bankruptcy, and a car and a house payment.

"I'm generally a responsible person," she says. "But I just got in over my head."

And she's not alone. The total number of bankruptcies in the year ended June 30 hit over 1.5 million the largest number of cases ever filed in any 12-month period and the first time they have ever totaled more than 1.5 million, according to the Administrative Office of the U.S. Courts, which handles federal bankruptcy filings.

Of that total, some 1.47 million were personal bankruptcies, up 8.6 percent from the same period the previous year.

Bankruptcy experts say the jump in bankruptcies is not a shock given the slumping economy, rising unemployment and lackluster stock market, along with a steadily increasing diet of debt indulged in by many Americans.

"I'm not surprised," says Elizabeth Warren, a professor of law at Harvard Law School who specializes in bankruptcy. "For many Americans, these are uncertain economic times."

No Assets, No Payments

The record bankruptcy levels come at a time when the government is considering controversial new laws making it more difficult for consumers to file for bankruptcy.

When Congress convenes in September, it is expected to consider a bill that among other provisions would impose a means test on debtors and possibly require them to pay back some or all of their debts if their income met a certain level, effectively forcing them from Chapter 7 into Chapter 13 bankruptcy.