Consumers Charge To Bankruptcy Court Personal Filings Jumped By A Third Last Year In Spokane, Seattle And Boise

Overextended Washington and Idaho consumers surrendered to bankruptcy last year in record numbers despite healthy economic growth in both states.

Statistics from U.S. Bankruptcy courts in Spokane, Seattle and Boise show filings jumped by one-third over 1995, with the overwhelming share of the increase due to filings by individuals.

In case after case, bankruptcy attorneys said, credit card debt mounted until an emergency or some disruption in income triggered a meltdown.

“Clients have accumulated remarkable amounts of debt spread across several credit cards,” said Barry Davidson, who handles bankruptcies for both businesses and individuals.

Davidson said banks are so desperate for card customers they offer to continue carrying clients who’ve already turned to bankruptcy.

“It’s just unbelievable,” he said.

Davidson said he thinks bankruptcy filings continue to swell in a thriving economy because banks have become careless with credit.

When coupled with a general sense of well-being among consumers, the result is overspending.

“The people we see probably got in trouble one day at a time,” he said.

One woman who recently filed bankruptcy in Spokane is fairly typical. She owes $20,000.

The 23-year-old expectant mother, who did not want to be identified, said she and her boyfriend were able to handle the balances on five credit cards until he moved away temporarily.

Unable to share living expenses, they could no longer make the monthly minimum payments, she said.

“We could never catch back up,” she said, even after her boyfriend returned. The boyfriend has also filed for bankruptcy.

The couple sought help at the Consumer Credit Counseling Service of Spokane, she said, but erasing their debt would have required monthly payments of $400 for four years.

Though both work, that was not an option with a baby on the way, she said.

“We barely have enough for anything,” she said.

The woman said she did not make the decision to file bankruptcy lightly. “It was pretty much my only choice,” she said.

Attorney Tim Nodland said the woman and her boyfriend are like many people who use their cards for everyday expenses, not the luxuries that signal irresponsible extravagance.

“They stretch themselves a little thin,” he said.

He noted that interviews with bankruptcy candidates are already filling up his calendar. The trend will accelerate as the tax season approaches, he said.

A spokeswoman for Seafirst Bank, Washington’s largest credit card issuer, said the bank is not easing its credit standards. Sheri Pollack would not disclose what percentage of the bank’s credit card loans are not repaid, but she said losses are below the industry average.

Sandpoint attorney Ford Elsaesser said credit card companies are not the only ones at fault.

Car and insurance dealers are constantly advertising credit terms for those who have filed bankruptcy, he said.

Nor, he said, do people consider a filing a potential black mark when they apply for a job, seek a promotion, or even get additional credit. They can liquidate their assets in bankruptcy and clean the slate as frequently as every six years.

“There’s no disincentive,” Elsaesser said.

He said his concern is the huge surge of bankruptcies that could hit the courts if economic conditions deteriorate the way they did in the 1980s.

Even in the good times, business at Consumer Credit Counseling is booming.

President Mark Harnishfeger said the number of first-time cases grew 16 percent last year, and the number of families using the agency’s debt-management service was up 19 percent.

But as fast as the agency has grown, he said, it has not kept up with the activity in bankruptcy court.

More than 30 percent of the newcomers are too far gone to avoid filing, Harnishfeger said.

The trend in Washington and Idaho is not unique. Although final figures for the country as a whole are not in, filings for the first three quarters of 1996 were up about 25 percent over the same period in 1995.

Credit card issuers last month asked a Bankruptcy Review Commission to impose new tests on individual ability to repay debt when they file for protection in the court.

, DataTimes ILLUSTRATION: Graphic: Bankruptcy Boom