For the third straight year, a record number of bankruptcy petitions were filed in Eastern Washington in 2002. The trend, experts say, is expected to continue this year.
Last year, businesses and consumers filed 10,154 petitions seeking protection from creditors in the U.S. Bankruptcy Courts eastern district of Washington, which is based in Spokane. Thats up from 10,096 petitions filed in 2001 and well above the 8,357 filings in 2000. The district includes all bankruptcies filed in Washington state east of the Cascade Mountains, and maintains an office in Yakima.
Nationally, bankruptcy filings also hit a new high last year. About 1.55 million businesses and consumers nationwide filed for protection from creditors during fiscal year 2002, which ended Sept. 30. Thats up by more than 100,000 filings from fiscal 2001, when about 1.44 million businesses and consumers filed for bankruptcy.
U.S. Bankruptcy Court Judge Patricia C. Williams, who serves on the bench here, says that as long as the U.S. economy remains depressed, We are not going to see any drop in bankruptcy filings. Locally, I think we are going to have a slow, slight increase in bankruptcy filings.
Robert C. Hahn III, a bankruptcy attorney with Raugust & Hahn PLLC, of Spokane, says filings here could increase at a greater rate if anticipated federal bankruptcy reform legislation becomes law. Such legislation, which failed narrowly last year and is expected to be proposed again, would make filing for bankruptcy more difficult, he says, and those thinking about seeking bankruptcy protection might rush to file before a new law would go into effect.
There may be some additional pressure to file, he says. There are a lot of people who have been thinking about it for a long time.
Kevin ORourke, a bankruptcy attorney with Southwell & ORourke PS, of Spokane, says that practice has seen an increase in both consumer and business bankruptcy filings.
Some consumers have lost jobs and either have struggled to find employment or have had to accept work for less pay, ORourke says. While take-home pay falls in such instances, debt load typically stays the same, and people turn to bankruptcy to help dig themselves out of a financial hole, he says.
Other common factors leading to bankruptcy filings include unforeseen medical expenses and divorce.
While some major corporations made headlines last year by filing for bankruptcy, most business bankruptcies in Eastern Washington involve small concerns with assets of less than $1 million, Williams says.
The current, depressed economy has slowed revenue streams and forced some small businesses to seek protection from creditors, she says. In some cases, however, small businesses file for bankruptcy for some of the same reasons as consumers, such as a business owners failing health or failed marriage.
Consumers accounted for 98 percent of the bankruptcy filings in the eastern district last year. In 2001, consumer filings made up 97 percent of the overall total.
Of all the bankruptcies hereboth business and consumer75 percent are Chapter 7 filings, which involve liquidation of assets. Chapter 13 filings, which are designed for wage earners seeking to create a plan to repay debt, account for 24 percent of the filings. The final 1 percent includes Chapter 11 filings, which involve reorganization of debts, and Chapter 12 filings, which are for agricultural producers.
Last year, about 1.55 million businesses and consumers nationwide filed for protection during fiscal year 2002, which ended Sept. 30.
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