Bankruptcy filings in Eastern Washington rose again in 1998, to a record high, and bankruptcy observers say theres no signs that the increases will end anytime soon.


Businesses and individuals filed 7,795 petitions seeking protection from creditors in the U.S. Bankruptcy Courts Eastern Washington district, which has its offices here but also accepts filings in Yakima. Thats an 11 percent rise in filings over 1997, but the rate of increase was smaller than a 22 percent jump in 1997 and a big 36 percent rise in 1996. Bankruptcy filings here have been going up since 1995.


Bankruptcies also are on the rise nationally. Bankruptcy petitions filed in the U.S. rose more than 5 percent in the 12-month period that ended Sept. 30, 1998, to about 1.4 million, according to the Administrative Office of the U.S. Courts, in Washington, D.C. Bankruptcy filings nationally first exceeded 1 million back in 1996.


With the general softening in the economy here, I expect that bankruptcies will continue at a fairly high rate for the foreseeable future, says Barry Davidson, a bankruptcy attorney at Davidson, Bailey & Medeiros.


Judge Patricia Williams, who serves on the bench of the U.S. Bankruptcy Court here, says the reasons for the rise in filings are as varied as the people who file petitions. Still, the lowering of credit standards, the prevalence of divorce, and the predominance of low-wage jobs in the Spokane area all are partly to blame for the increase in filings in the Eastern Washington district, which includes all of Washington east of the Cascade Mountains, Williams says.


Nationally, credit-industry experts blame consumer credit-card companies for the increase in filings. Williams says that as the credit-card industry becomes more competitive and aggressive, a number of companies are offering cards to people whom they know present a financial risk. As those people obtain credit cards, its fairly certain that a percentage of them will default and some will file for bankruptcy, she says.


Statistics show, however, that the holders of less than 1 percent of all credit-card accounts at any one time become involved in bankruptcy proceedings, Williams says.


Divorceor more generally the splitting up of any couple who share a householdis involved in many of the bankruptcy cases that Williams sees.


What you have is a family living on a particular amount of income. Then that family splits up, and now you have two households living on the same amount of income, Williams says.


A problem thats specific to the Spokane area is the disproportionate number of people at the low end of the wage scale, the judge adds. Many of these people dont have health-care benefits and thus might have no way to pay big expenses when medical problems arise, she says.


Its obvious that with the low wages theyre earning, they have no financial reserves. That means that what otherwise would be a financial disadvantage becomes a financial disaster, Williams says.


In 1998, both nationally and in Eastern Washington, Chapter 7 liquidation cases have increased, while Chapter 11 reorganization cases have decreased. Williams says most Chapter 7 filings relate to consumer cases, in which the individual has no assets and no ability to repay his or her debt. A Chapter 11 filing, on the other hand, gives a business a chance to reorganize its finances and attempt to stay in operation.


Chapter 11 filings have been declining for a couple of years now nationally, but Williams says experts believe the trend will reverse itself this year, with a rise in the number of Chapter 11 filings and a slight decrease in the number of Chapter 7 cases. She expects the national projections to hold true in Eastern Washington, especially because of the struggling agricultural market in the Yakima area, which in turn would boost business reorganizations.


Bankruptcy attorney Davidson, who specializes in business reorganizations, has seen some increase in the number of business failures lately. He says in a number of cases, construction materials suppliers and contractors have had to file for protection from creditors.


Davidson says hes also seen indications that there will be an increase in the number of bankruptcy cases filed by health-care management companies as that industry continues to undergo changes. He sites HealthLink Inc., of Spokane, as the first example here.


Nick Warrick, president of Credit Bureau Services, of Spokane, also expects the number of bankruptcy filings here to continue to grow. He echoes Williams concerns about the aggressiveness of credit-card lenders, but says another big reason for the increase is that bankruptcy law makes filing for protection too attractive and easy, and doing so doesnt seem to hold the stigma it once did.


Warrick contends that at this point there are no consequences for filing bankruptcy. A person can file and then turn right back around and get credit again, he says.


Jake Miller, assistant U.S. Trustee for the Eastern Washington district, expects Congress this year to debate whether to toughen bankruptcy laws.


The big increases (in bankruptcy filings) have come to the attention of our congressional leaders, and I wouldnt be surprised if drastic changes are in the wind, Miller says.


Nationally, experts are predicting that the number of bankruptcy filings in 1999 will begin to level out and will remain relatively constant, Williams says.


Locally for Spokane, if we differ at all from the national statistics, its going to be because of the low-paying jobs here, she says. She contends that if the number of people with low-wage jobs here continues to increase, the number of bankruptcy filings here likely will increase, too.