ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Monday, April 22, 1996 TAG: 9604230088
SECTION: VIRGINIA PAGE: C-4 EDITION: METRO
DATELINE: HARRISONBURG
SOURCE: Associated Press
Some people blame divorce or the seduction of credit cards. Others had their pockets picked by medical costs. And for some, job layoffs were the final straw. It all adds up to a record number of bankruptcy filings in the first three months of 1996 in Western Virginia.
While some bankers contend bankruptcy is a protection that rewards wasteful spending, others say it offers a fresh financial future to people who need one.
``It's becoming an accepted norm'' for people and companies to file for bankruptcy, which is a matter of federal law, said John W.L. Craig II, court clerk for the U.S. Bankruptcy Court's Western District of Virginia, based in Roanoke.
As of April 1, Craig said, 2,192 filings had been recorded in the Western District. That's an increase of 30.9 percent from the 1,675 filings recorded in the first quarter of 1995, which also had been a record for filings in a single quarter.
Filings increased in all three divisions of the district, which includes Harrisonburg, Lynchburg and Roanoke.
Depending on the type of bankruptcy filing, debts may be excused, a portion may be paid, or an entire amount paid on a set schedule.
William L. Stables Jr., a Harrisonburg lawyer who handles many personal bankruptcy cases, has seen an increase this year.
Increased credit card debt, medical costs and marriage breakups are among the most common reasons for Chapter 7 bankruptcies - most of which are filed by individuals, not companies, Stables said.
In a Chapter 7 filing, a person or company seeking protection from creditors reveals debts and assets in court, and creditors are paid from assets that are not deemed exempt by the court. Exempt assets typically include clothing, household furnishings, appliances and sometimes vehicles and houses. Virginia law prohibits some debts - including child support and college loans - from being exempt. A person or company may file for Chapter 7 protection every six years.
Stables has had more clients recently with a larger percentage of credit card debt and more credit cards, which he attributes partly to increased solicitation by banks and credit card companies. Many cases involve people with credit card debt of between $10,000 and $20,000.
``The consumer is not policing himself, disciplining himself, well enough. But then the marketplace isn't disciplining itself,'' Stables said. ``The credit card companies are falling all over themselves to extend credit. They must be making money.''
A bankruptcy petition recently was filed in Craig's court by someone with 19 credit cards, all of which were maxed out, he said.
Around the United States and locally, most individual Chapter 7 filings are ``no-asset cases'' in which creditors do not get what's owed them because the debtor has no assets that may be used, Stables said.
Bankruptcy usually involves debt coupled with a crisis such as illness, job loss or a dissolved marriage.
The Harrisonburg-based Blue Ridge Legal Services provides free legal aid in civil matters to low-income people from Winchester to Augusta County.
That office also had an increase in requests for bankruptcy filings in the first quarter of this year. The most common reason is medical bills for people without health insurance, executive director John Whitfield said. One client has $30,000 in medical bills and no insurance. Her wages are being garnisheed.
``Bankruptcy is an opportunity for honest, hard-working people who've been overwhelmed by their responsibilities ... to be given a fresh start,'' he said.
Some bankers view bankruptcy differently.
``I think it's way too easy for someone to file bankruptcy. Why should they run up $20,000 in debt and go out here, pay $400 [for legal aid] ... and it's all taken care of?'' said Mike Estes, associate vice president of Black Diamond Savings Bank in Harrisonburg. ``It's sickening to me as a banker.''
Wayne Smith, president of the Harrisonburg-based F&M Bank-Massanutten, said his bank has had more people file for bankruptcy lately, but loan losses have not increased. ``It's the duty of the bank to make sure you don't go out and make a loan to somebody who has nothing,'' he said.
LENGTH: Medium: 81 linesby CNB