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Bankruptcy Skids

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Fewer Americans filed for personal bankruptcy last month, according to new data from Visa U.S.A. Increasing at a pace of about 25 percent per month on a year over year basis for most of 1997, the growth rate of personal bankruptcy filings allowed significantly in June to 16.6 percent. This marks the first major downturn since early 1996 and represents the first decline in the month of June since late 1994.

Based on the June data, Visa announced today it has revised its 1997 forecast for personal bankruptcies to 1,325,042. This represents an 18.6 percent rate of growth over 1996, far lower than Visa’s original 1997 projection of 29.1 percent rise, and lower than the 26.6 percent increase in filings from 1995-1996.

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Fewer Americans filed for personal bankruptcy last month, according to new data from Visa U.S.A. Increasing at a pace of about 25 percent per month on a year over year basis for most of 1997, the growth rate of personal bankruptcy filings slowed significantly in June to 16.6 percent. This marks the first major downturn since early 1996 and represents the first decline in the month of June since late 1994.

Based on the June data, Visa announced today it has revised its 1997 forecast for personal bankruptcies to 1,325,042. This represents an 18.6 percent rate of growth over 1996, far lower than Visa’s original 1997 projection of a 29.1 percent rise, and lower than the 26.6 percent increase in filings from 1995-1996.

While encouraged by the new figures, Visa remains concerned about the overall level of filings and will continue its work on reforming the bankruptcy code and promoting greater consumer education.

“While bankruptcy relief should be available to those who need it, these latest statistics suggest that more people are beginning to address their financial problems outside of the courtroom. This is a positive sign when you consider that consumers absorbed more than $30 billion in bankruptcy-related costs last year,” said Kenneth Crone, senior vice president of Visa U.S.A.

“We need a bankruptcy code that provides debtors with the amount of relief they need, no more, no less. The current system allows many individuals to wipe out debt they could repay. We must also continue to promote alternatives to bankruptcy, such as Consumer Credit Counseling,” Crone added.

Earlier this year, Visa announced a multi-million dollar consumer education program. The campaign includes a national radio advertising campaign to make consumers aware of credit counseling as an alternative to bankruptcy as well as consumer education seminars featuring personal finance columnist Terry Savage. Both programs are linked to the non-profit National Foundation for Consumer Credit, which supports counseling services in communities throughout the nation.

Visa U.S.A. maintains a daily tracking system of all personal bankruptcies filed in federal courts throughout the United States. It provides this information to its member financial institutions on a weekly basis.

Year over year comparison of monthly rates of growth in personal bankruptcy filings 1996-1997

                              STATE                      JUNE           MAY               APRIL
                              California                   9.2%           15.4%               16.9%
                              Florida                      27.9              33.2                  22.4
                              Georgia                       7.1              30.5                  17.1
                              Illinois                      11.5              11.6                  29.6
                              Massachusetts           18.5              60                     23.3
                              New York                 13                 32.7                  24.2
                              Pennsylvania              5.5              37.8                  23.3
                              Texas                        17.3             38.2                   22.3
                                                     Source: Visa U.S.A.

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