Bankruptcy filings in Eastern Washington rose last year to a record high, and some observers say the increase will continue.


During 2000, businesses and individuals filed 8,357 petitions seeking protection from creditors in the U.S. Bankruptcy Courts Eastern Washington district, which has its offices here and also accepts filing in Yakima. That figure is up more than 7 percent over 1999, when bankruptcy filings fell slightly after three years of double-digit increases.


Nationally, bankruptcies dropped for a second consecutive year in the federal governments 2000 fiscal year. Bankruptcy petitions filed in the U.S. fell nearly 7 percent in the 12-month period, ended Sept. 30, 2000, to about 1.3 million, according to the Administrative Office of the U.S. Courts, in Washington D.C.


U.S. Bankruptcy Court Judge Patricia Williams, who serves on the bench here, says filings in 2001 nationally are expected to remain steady or perhaps increase slightly, but she declines to predict what will happen with the number of filings in the Eastern Washington district, which includes all of Washington east of the Cascade Mountains.


Spokane bankruptcy attorney Dan ORourke, however, says that he expects bankruptcies in Eastern Washington to continue to rise until agricultural prices stabilize.


ORourke attributes the rise in filings to Eastern Washingtons depressed agricultural economy, as well as to increased fuel costs, which are leading to a downturn in the trucking industry here.


Most of the bankruptcies Im seeing right now are ag related, ORourke says. It used to be just wheat farmers and hay farmers, but now were talking about fruit farmers, too. The filings have a trickledown effect because they impact chemical companies, equipment makers, and the like.


Williams also says that the weak agricultural industry is contributing to the rise in bankruptcy filings in Eastern Washington, and says the predominance of low-wage jobs in both the region and in the Spokane area is playing a role, too. She adds, however, that in general, a majority of bankruptcy filingsboth in Eastern Washington and nationallyare caused by divorces, job disruptions, and rising medical bills.


I suspect that as an increasing percentage of the population in Eastern Washington continues to earn what I call, subsistence wages, which equal less than $8 an hour, were going to continue to see a rise in bankruptcy filings, Williams says. These people have no financial safety net. They live paycheck to paycheck. They have no benefits or at least minimal benefits, and when they do have a job disruption, where theyre out of work for six to eight weeks, they find themselves in a position where they have to put expenses on credit cards and seek cash advances to pay the rent.


Williams adds that in 1998 she examined a number of Chapter 7 liquidation cases and found that the gross median annual income of debtors filing jointly was between $24,000 and $27,600, and the gross median annual income of single filers was between $17,000 and $21,600.


Thats very low income and when you add to that a six-to-eight-week job disruption, $250 in medical bills, and a $350 expense to repair their 10-year-old vehicle, you can see why they begin putting expenses on credit cards, Williams says. Were not talking about people who are charging European vacations.


Preston Ritter, marketing director for Credit Bureau Services here, says he believes other factors that have contributed to the rise in filings include a lessening of the social stigma that once was attached to filing for bankruptcy. Also, lenders have more aggressively pursued high-risk customers, and people, in general, are pursuing instant gratification purchases and arent saving money as they should, he contends.


Lines-of-credit are being viewed as savings accounts, and when that happens, it doesnt take long to put people over the edge (financially), Ritter says.


In 2000, both nationally and in Eastern Washington, Chapter 11 business reorganization cases increased. In Eastern Washington last year, Chapter 7 liquidation cases and Chapter 13 reorganization of individual debt cases also rose.


Williams attributes the rise in Chapter 11 reorganizations in Eastern Washington to the expiration of Chapter 12which provides for the filing of farm-related caseslast June. She says that Congress didnt get around to renewing that filing option last year, which left Chapter 11 cases as one of the only options for farmers. Congress is expected to renew the Chapter 12 option this year, she says.