ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Saturday, August 24, 1996 TAG: 9608260031
SECTION: BUSINESS PAGE: A-4 EDITION: METRO
SOURCE: MAG POFF STAFF WRITER
DESPITE A DECENT economy, people around the state are following a national trend and filing bankruptcies in record numbers.
Easy credit, a sluggish economy and medical payments are driving record numbers of Western Virginians to bankruptcy.
John W.L. Craig II, clerk of the U.S. Bankruptcy Court for the Western District of Virginia, this week predicted that the number of filings in the Roanoke-based court will top 9,000 during 1996. That estimate is up from 8,700, predicted by Craig just three months ago.
Bankruptcies, he said, "are still growing at the fastest rate in this court's history." That reflects a national trend, with filings nationwide expected to exceed 1 million cases during 1996.
Roanoke lawyer Robert Szathmary said he's already filed "a lot more" cases for clients so far this year than he did all last year.
Another Roanoke bankruptcy lawyer, Malissa Lambert Giles, cited three factors responsible for bankruptcies:
"Income does not seem to keep up with debts." Medical costs are a special problem, Giles said, because many people lack adequate health insurance. Even if they are insured, she said, many families cannot cope with 20 percent co-payments, and medical providers won't work out payment plans.
Ready access to credit cards. If people are in any financial distress, Giles said, all the offers of credit cards are "almost too good to resist." People charge on the cards in addition to their car payments and other debts.
The more people file bankruptcy, the less social stigma is attached to it, which leads to more filings and continues the cycle.
"Credit cards are the scourge of society," said Vinton lawyer Bruce E. Mayer. They affect people across the board, from struggling young couples to older people living on Social Security, who charge their expensive medications, he said. Even people with good income "are spending themselves into oblivion."
Mayer said one of his clients is a single man with $30,000 charged against credit cards who "had nothing to show for it." The money had been spent on fleeting items such as clothes and meals.
That, and the high cost of medical care, he said, account for nine of 10 bankruptcies he sees in his office. People affected by divorce or a bad business investment constitute only a small minority.
Banks offering credit cards to people who don't ask for them is like "going to the candy store and leaving your kids there with the jars open," he said.
"It's a quiet explosion," Roanoke lawyer Richard C. Maxwell said of the filings. The numbers, he said, belie the general belief that the local economy is good because people are no better off than they were a few years ago. The increase in bankruptcy filings shows "the economy is much thinner than people expect. More people are on the edge."
The trend is bad, Maxwell said, because "you and I pay for all that debt that's discharged."
He said he worries about what will happen to strapped businesses and individuals if interest rates start climbing.
Evelyn Krippendorf, a bankruptcy court trustee and lawyer in Roanoke, said recent layoffs at local industries and the selling of some companies have created anxiety about debt, despite a generally good economy.
Krippendorf, said the majority of people who file for bankruptcy have charges on multiple credit cards. But she said that people don't have any more credit cards now then they've had in the past.
Onzlee Ware said most cases in his law practice are because of high medical bills. People have surgery or go to the hospital and can't pay the costs.
His clients are working people and want to work out payment plans, Ware said, but they are unable to do it.
Lawyer Andrew Goldstein said individuals account for most of the increase. He attributed the filings to easy credit gained by people using credit cards, second mortgages and home equity loans. "Other than that," Goldstein said, "it's anybody's guess."
LENGTH: Medium: 79 lines ILLUSTRATION: GRAPHIC: Charts by staff. 1. Banruptcy in Western Virginia. 2.by CNBTotal bankruptcies. 3. Types of banruptcies. color.