Californians, continuing to seek financial refuge in the courts, filed a record 53,361 personal bankruptcies in the second quarter, up 21.2% from a year earlier, a research firm reported Tuesday.
But the rate of growth in bankruptcies abated somewhat from the 30% to 35% increases seen for the previous two years--a finding certain to add fuel to the raging nationwide debate over bankruptcy reform.
The results, reported by Santa Ana-based CDB Infotech, are similar to those in a nationwide study conducted recently by Visa USA. In that study, the rate of growth of bankruptcy filings nationwide slowed to 16.6% in June, from increases in the 25% range during the previous several months.
"Whether this is a trend or not remains to be seen," said David Sandor, a Visa USA spokesman. "But we're encouraged by it. It suggests that more people seem to be working out their problems outside the courtroom."
Experts say the slower rate of increase could be due to an improving economy. But they continue to worry that too many people are seduced by easy credit and the growing social acceptance of bankruptcy as a financial tool.
In 1996, total bankruptcies nationwide surged 27%, to 1.16 million. Through mid-July, filings were up an additional 23%, from a year earlier, according to MasterCard International. That puts the nation on track to hit a record 1.3 million to 1.4 million bankruptcies this year.
"It's obvious that a lot of people have been given access to credit who can't handle it responsibly," said Rick Rozar, CDB's president and chief executive.
In its study, CDB measured the number of Chapter 13 bankruptcies, which allow debtors to repay some debts while they reorganize their finances, and Chapter 7 liquidations. The vast majority of those types of filings are made by individuals or couples.
In Los Angeles County, bankruptcies jumped 21.4% from a year earlier, to 16,573 in the second quarter. In Orange County, filings were up 12.6% to 4,582.
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Although high bankruptcy levels have been associated with problems such as divorce and lack of medical coverage, many critics have pointed their fingers squarely at credit card issuers.
Ike Shulman, a San Jose lawyer and chairman of the legislative committee of the National Assn. of Consumer Bankruptcy Attorneys, said the profits that credit card companies earn from charging high interest rates more than offset the losses they suffer when debtors declare bankruptcy.
