ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Tuesday, April 16, 1996 TAG: 9604160071
SECTION: BUSINESS PAGE: B-6 EDITION: METRO
SOURCE: MAG POFF STAFF WRITER
An uncertain job market, too-easy credit and even attorney advertising were cited by some local lawyers as reasons for a sharp upturn in bankruptcy filings in Western Virginia.
John W.L. Craig II, clerk of the U.S. Bankruptcy Court for Western Virginia, predicted that the number this year will reach 8,768. That forecast compares with 7,161 last year, a record for Western Virginia.
He based that on 2,192 filings in the first quarter of this year, an increase of 30.9 percent from the old record of 1,675 cases in the first quarter of 1995 - at that time the most filed in any quarter in the history of this district.
In the last quarter, Craig said, the Roanoke Division was up 16.8 percent from this time last year. Harrisonburg filings were up 34.7 percent, and Lynchburg reported an increase of 51.4 percent. Roanoke, however, remained the busiest division with 996 of the cases, compared with 804 in Lynchburg and 392 in Harrisonburg.
The overwhelming majority of the cases were liquidations by individuals.
Craig reported that liquidations of all kinds constituted 84 percent of total filings for the quarter, compared with 80 percent in 1995. He said wage-earner plans for repayment of debts dropped two points from last year's 16 percent. Corporate reorganizations and family farm filings were up slightly.
"Never in the history of this court have filings increased so precipitously over a three-year period," Craig said. "The court experienced a decline in filings during the early '90s; but since 1993, we have seen unprecedented growth in bankruptcy filings."
Charles R. Allen Jr., who acts as a liquidation trustee for the court as well as an attorney for filers, cited two possible reasons for the increase.
He said credit cards are so easy to obtain that people are tempted into debt. Banks, he said, are "lax in how they extend credit."
In those or in other cases, he said, people have health and medical bills for which they lack insurance.
Allen said it's also possible that lawyer advertising about bankruptcy filing could be a factor.
Three classified ads for bankruptcy filings appeared in Monday's edition of The Roanoke Times.
One of them, placed by Michael D. Hart, said in part: "CEASE creditor harassment; STOP garnishment, foreclosure; PROTECT home, car, wages; CONTROL IRS, student loans."
Hart said more lawyers are stating in advertising what a person can do in bankruptcy. In the past, he said, people were unaware of what could be done. Now lawyers are telling them.
Prior to the last few years, he said, most people were kept in the dark about bankruptcy.
He blamed most of the increase on four causes:
* Hart cited "a lot of downsizing and job transition in the marketplace." He said people live on 100 or 110 percent of their income. If the income drops $5,000 to $10,000 a year, he said, they "go under." That accounts for 25 percent to 30 percent of the cases in his practice.
* Widespread divorce is another trigger, he said. People living close to the edge of their income "crash and burn" when they face the additional financial burden of a divorce.
* Other people, he said, "just do not know how to use consumer credit." They get credit cards, overcharge on them and wind up in bankruptcy.
* Finally, he said, people may be uninsured or underinsured and suddenly face a major medical problem that sends them into bankruptcy.
Those four instances, Hart said, account for "90 percent of the people I see" as a bankruptcy attorney.
LENGTH: Medium: 73 lines ILLUSTRATION: GRAPHIC: Charts by staff. 1. Bankruptcy in Western Virginia. 2.by CNBFilings for first three months of 1996.