Bankruptcy filings in Spokane soared 31 percent in 1995, reaching levels not seen since the economic dog days of the 1980s.
The figures are another sign, along with declining construction permits and sluggish retail sales, that the feverish economic growth of the early 1990s has caught a chill.
But, noted local economic commentator Phil Kuharski, the information may also reflect changing attitudes about debt, and in the nature of the debt itself.
The number of filings in Spokane - 2,025 - was about half those recorded in the U.S. Bankruptcy Court for Eastern Washington, which includes locations in Richland, Yakima, Wenatchee and Moses Lake.
Of those, only Wenatchee reported fewer filings than in 1994. Richland numbers mushroomed 36 percent, reflecting the downturn in activity at the nearby Hanford Nuclear Reservation.
Overall filings in the district were up 28 percent to 4,207.
By comparison, filings in both Western Washington and the five northern counties of Idaho climbed about 19 percent.
Bankruptcy Court Clerk Ted McGregor said the increases are not out of line with reports he has seen for the country as a whole.
Despite the surge of paperwork, he said, the court was able to close slightly more cases than were opened. A typical debt liquidation under Chapter 7 of the Bankruptcy Code can be completed in less than four months because automation takes care of tasks like tracking creditors, he said.
Bruce Boyden, who is a court trustee as well as an attorney specializing in bankruptcy, said he will sit down with 23 different groups of creditors today, mostly concerning cases involving monthly incomes of $1,300 to $2,500.
Households with such marginal earnings try to hang on using credit, particularly credit cards, he said.
Boyden said some filers took out second mortgages on their homes to consolidate debt created by credit card abuse.
But they did not change their spending habits, he said, and with home values flat, there is no additional equity to tap.
Boyden and Nancy Isserlis, another bankruptcy attorney, said businesses and individuals in construction fields were among those showing up more frequently.
Isserlis said some adjustments in bankruptcy laws have made it easier for some people to file.
Many, she said, come into her office ready to go to court, but have the assets and income that, with help, should enable them to avoid filing.
“Bankruptcy should always be the last option, not the first one,” she said.
One of the agencies to which Isserlis refers clients is Consumer Credit Counseling of Spokane.
President Mark Harnishfeger said about 30 percent of those in the agency’s debt-management program are in bankruptcy.
“We’re seeing a lot more business here,” he said, but counselors try to steer clients clear of bankruptcy, which will show up on credit reports for as long as 10 years.
Kuharski said other indicators do not support the gloomy reading of the local economy that bankruptcy filings alone might.
For example, he said, home foreclosures in 1995 increased only slightly, and were far short of the numbers that accompanied the flood of bankruptcies in the 1980s.
Personal income growth is excellent, Kuharski added, and the cost of debt will ease as the Federal Reserve Bank continues to lower interest rates.
He said bankruptcy filings reflect a certain amount of gamesmanship by people who do not want to face up to the consequences of their spending habits.
“I can’t make a case that there’s a significant household purchasing problem,” he said.