Rise in Bankruptcy Filings

By: Adam Cataldo

For the last 15 years, John, a 55-year-old resident of the North Shore,has struggled to provide care and assistance for his mother, 85, who suffers from arthritis and high blood pressure.To do that, John, who requested that his last name not be published,was forced to supplement his government salary with credit cards to buy hism other's walker, a wheel chair and other items.By last August, John owed about $44,000 on four or five different credit cards. And for the last 10 years, he said, almost all of his monthly payments were being applied to interest on his debt."It got to be like trying to empty the ocean with a colander," John said. "Something catches you and you can't make a payment and it just add sand adds."Last year John filed for bankruptcy, becoming one of the 1,299 residents of Staten Island to file for Chapter 7 or Chapter 13 bankruptcy protection, a 1.9 percent increase over the previous year, according to figures provided by the U.S. Bankruptcy Court for the Eastern District of New York.That increase is below the national increase of 5.3 percent. In 2003,1,649,380 Americans filed for Chapter 7 or Chapter 13 bankruptcy, based on figures posted on the Web site of the American Bankruptcy Institute, a nonpartisan research and information group based in Arlington, Va.In Chapter 7 bankruptcy, a person's assets, if any, are liquidated,except for basic items such as clothing and furniture. After those assets are applied, remaining debts to most creditors, such as credit card companies, are forgiven. Most people on Staten Island and in the United States who file for bankruptcy do so under Chapter 7.Under Chapter 13, a person must come up with a plan to repay all or a portion of their debts to creditors over a five-year period. The plan must be approved by a bankruptcy court judge. People who have built up substantial equity in their homes, or who have a major asset they want to keep, file for Chapter 13.One of the reasons why personal bankruptcies continue to increase is that consumer debt in the nation has doubled over the past decade, said Roger Whelan, resident scholar at the American Bankruptcy Institute.That is occurring at the same time as the average rate of savings isdecreasing."People have a lot less reserves to meet the personal emergencies that would trigger a bankruptcy filing," said Whelan, a former bankruptcy courtjudge.Karen Gross, a professor at New York Law School who specializes in consumer finance issues, said there is usually more than one reason why a person is forced to file for bankruptcy."In a given year if any one of these variables goes out of whack, it could drive someone on the edge over the edge," Ms. Gross said.Many Americans, she said, now use credit cards to pay for their basic living expenses which, over the long term, is a dangerous strategy."As a nation, we suffer from credit illiteracy," Ms. Gross said. "You have to be able understand credit to use it well, and most people don't."It is that lack of knowledge and understanding that brings people to the office of Paul Hollender, a bankruptcy attorney in Bloomfield.Hollender, who handled John's case, said he thinks the absence of a major plant closing and a loss of jobs has helped to keep the rate of Island bankruptcy filings below the national average.Hollender said many of his clients used credit cards to supplement their incomes and planned to pay off their debts over time as their salaries increased. For many people, those raises never materialized.Hollender said some of his clients had been depending on overtime earnings to meet their basic living expenses. Others had factored their overtime earnings into their budgets, money which has decreased or disappeared altogether over the past couple of years.Hollender saw the increase in bankruptcy filings in his own business.In 2002, he handled 220 bankruptcy cases. In 2003, he handled 240 cases,about 90 percent of which were for personal bankruptcies."I think people have been holding off for a long time, and they can't hold off any longer," Hollender said. "There just reaches a point where you run out of money, you run out of available credit cards and you have to deal with it, one way or the other."Bankruptcy filings on Staten Island and nation as a whole Staten Island 2002* Chapter 7 filings: 1,065* Chapter 13 filings: 210Staten Island 2003* Chapter 7 filings: 1,097* Chapter 13 filings: 202U.S. 2002* Chapter 7: 1,109,923* Chapter 13: 455,877U.S. 2003* Chapter 7: 1,176,364* Chapter 13: 473,016American Bankruptcy Institute

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