THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Friday, January 19, 1996 TAG: 9601190714
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: BY MYLENE MANGALINDAN, STAFF WRITER
LENGTH: Medium: 64 lines
Hurt by corporate downsizing and trying to shed consumer debt, more people in Hampton Roads are seeking relief in bankruptcy.
Filings at both of the region's two bankruptcy courts in Norfolk and Newport News increased 13 percent in 1995.
``It's an obvious reflection of the economy,'' said Jerrold G. Weinberg, a lawyer who represented the unsecured creditors in the Jonathan Corp. bankruptcy.
He pointed out that unemployment didn't explain the rise of bankruptcy filings because unemployment has stayed relatively flat. Rather, Americans' incomes haven't kept pace with their spending habits.
A record number of cases - 2,762 - were filed in the U.S. bankruptcy court in Newport News, pushing the filings at that location up 14.2 percent.
The two bankruptcy judges in Norfolk's court handled about 4,800 cases each, the two busiest case loads among the federal dockets there.
But Hampton Roads wasn't alone. The rest of the commonwealth and the country mirrored the local trend upward.
Filings in the Eastern District of Virginia, comprised of the courts in Richmond, Alexandria, Newport News and Norfolk, rose to 21,135 cases compared to 18,170 cases in 1994.
Bankruptcies jumped 11.9 percent in Virginia to 26,706.
And filings nationwide were up 5 percent, said David H. Adams, judge for the U.S. Bankruptcy Court for the Eastern District of Virginia.
Several economists and financial analysts predict that bankruptcies will increase in 1996.
Consumer debt and economic slowdown can be blamed as the two primary reasons for the rise in personal bankruptcies, Adams said.
According to the biweekly publication Consumer Bankruptcy News, lenders are worried that consumers cannot handle the steep surge in debt, nearing $400 billion in credit card debt alone.
Consumers owe $344 billion on outstanding car loans, $387 billion in revolving credit, $272 billion in other credit, including student loans.
``It's very scary,'' Adams said. ``They predict higher delinquencies and loan losses as the consumer becomes more over-extended. And, of course, with the (high) rates being charged, it's squeezing everybody.''
Adams also attributes higher numbers of bankruptcy filers to cost-cutting measures nationwide, affecting industries in this region like marine construction or companies like Jonathan Corp. The Norfolk shipyard folded in 1995 after coming out of bankruptcy, putting 250 people out of work.
The slimming down of Corporate America has forced many people out of work. To pay the bills, often they take lower-paying jobs, Weinberg said. However, they still carry credit card balances from their higher-income lifestyles that they cannot cover with their lower wages.
While bankruptcies have risen, the filings last year aren't the same record numbers lawyers saw in 1991 and 1992, said Debera Conlon, assistant U.S. Trustee.
Bankruptcy filings hit their peak of 10,100 cases in local courts during those two years. by CNB