Newspaper article The Christian Science Monitor

Bankruptcy Filings Rise Worldwide

Newspaper article The Christian Science Monitor

Bankruptcy Filings Rise Worldwide

Article excerpt

BANKRUPTCIES are increasing at an alarming rate in several key economies around the world.

Australia, Britain, and Canada have seen bankruptcy filings rise 50 percent or more within the past year. A Japanese credit-rating agency now expects bad debts related to bankruptcy to reach a record $50 billion in that country - more than triple last year's total.

Here in the United States, filings could top 1 million this year - an all-time high and the biggest jump since 1986. "Bankruptcies have gone up dramatically," says Louis Cappelli, senior executive vice president of Sterling National Bank and Trust Company in New York.

"The trend has certainly been up over the past several years," says Charles Luckett, an economist at the US Federal Reserve Board.

Part of the problem is recession. "We've had an English-speaking recession. And when there's a recession, bankruptcies go up," says David Wyss, research director of DRI/McGraw-Hill economic forecasting firm.

Australia, Britain, Canada, and the US have experienced slumps within the past year. Japan's economy has slowed dramatically.

But something else is at work - especially here in the US. Bankruptcy filings are rising even in years when there is no recession. Until the mid-1980s, bankruptcies rose sharply during recessions and rose slowly or declined during expansions. They tend to rise near the end of recessions because it takes time for delinquent bills to catch up with companies and individuals.

That pattern was broken in 1985, when US bankruptcy filings jumped 18.3 percent, followed by a 28.5 percent jump in 1986. Both were years of healthy economic growth.

The rate of increase slackened for the rest of the 1980s but reached 15 percent last year. If, as expected, the number of filings tops 1 million, 1991 could equal or exceed the 1986 increase. The postwar record was set in 1975, when filings jumped 34.3 percent. The record this century was 68 percent, set in 1921.

"The root cause of all this is too much debt ... and that has grown dramatically in the 1980s," says Sam Gerdano, executive director of the American Bankruptcy Institute. …

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