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PERSONAL BANKRUPTCIES REACH CRISIS LEVEL, BUT AREN'T DRIVEN BY ECONOMIC HARDSHIP, STUDY FINDS

 PERSONAL BANKRUPTCIES REACH CRISIS LEVEL,
 BUT AREN'T DRIVEN BY ECONOMIC HARDSHIP, STUDY FINDS
 BUDD LAKE, N.J., Aug. 11 /PRNewswire/ -- Personal bankruptcy filings have reached crisis proportions, yet poor economic conditions can't be blamed for the rise.
 That is the prime conclusion of The Personal Bankruptcy Crisis: A 2-1/2 Year Study, published today by SMR Research Corporation. The study measures total personal bankruptcy filings, plus a filing rate per 1,000 residents, in every state, each of 330 cities, and in the nation from 1989 to March of 1992. It also compares bankruptcy filing rates against unemployment rates in each location in a search to correlate bankruptcies and economic hardship.
 Nationally, personal bankruptcy filings may reach 1 million in 1992 for the first time, the study finds. The number of filings in 1992 is likely to be twice the number recorded in 1987, and three times the number filed at the peak of the deepest recent national recession in 1981.
 Surprisingly, personal bankruptcy rates failed to correlate with unemployment rates by state or city, and also didn't match other indicators of economic hardship. New England states and cities, although hard-hit economically, still show below-average personal bankruptcy filings per 1,000 residents. Other places with healthier economies and low unemployment often show much higher rates of personal bankruptcy.
 "While many bankruptcy filers surely are in desperate financial straits, this study proves that others now view U.S. bankruptcy courts as a government-operated refinancing market," declared SMR Vice President George R. Yacik, who headed up the study. "States and cities with the highest bankruptcy rates only occasionally show other signs of economic difficulty."
 In Memphis, Tenn., for example, the average unemployment rate over the 2-1/2 years was 5.20 percent, one point less than the national average of 6.20 percent. But Memphis led all U.S. cities in its bankruptcy rate with an average over the period of 12.39 filers per 1,000 residents per year. Memphis' average filing rate was 20 times greater than in Johnstown, Pa., even though Johnstown experienced a painful average unemployment rate of 8.49 percent over the same period.
 The same inverse relationship between bankruptcy and unemployment existed in some other cities and states, yet certainly not in all of them. In the net, the study found, there simply is no relationship at all between bankruptcy rates and unemployment rates. Also, the study reported, there is no apparent correlation between bankruptcy rates and other indicators of economic hardship, such as the home mortgage delinquency rate in local areas.
 Nationwide, the study found, the personal bankruptcy rate did fluctuate in tandem with overall economic conditions through 1985. But bankruptcies spiked sharply in 1986 and have spiraled higher every year since, regardless of other economic indicators.
 SMR estimated that personal bankruptcy filings will cost private sector creditors more than $10 billion in 1992, with about $4 billion of that sum lost by credit card issuers. Remaining amounts will be lost by other lenders, retailers, and businesses. Taxpayers, meanwhile, bear the cost to administer bankruptcy cases in court.
 The main objectives of the study were to present bankruptcy filing rates and trends in more detail than ever before, and also to probe for any correlation between filing rates and some economic "driver."
 The study recommends immediate further investigation into what really is causing high bankruptcy rates in communities that otherwise appear to be economically healthy. Possible causes might include changed local attitudes about the "social stigma" of a bankruptcy filing, levels of lawyer advertising in local areas, divorce rates, and state laws on the garnishment of wages.
 Other highlights of the SMR report:
 -- Bankruptcy filings of all kinds -- personal and business -- are almost certain to exceed 1 million for the first time in 1992. Bankruptcy filings during the height of the Great Depression in 1935 were only 69,000. Because personal bankruptcies currently comprise about 92 percent of all bankruptcy filings, they also may reach or exceed 1 million this year.
 -- There is a huge span in bankruptcy filing rates per capita from one place to another. Among states, Tennessee had the highest bankruptcy filing rate during the first quarter of 1992, with 7.86 filings per 1,000 residents over a trailing 12-month period. That number was more than twice the national average and more than eight times the rate in Hawaii, where only 0.97 filings occurred per 1,000 residents. At the city level, the span between highest-and-lowest bankruptcy rates per capita is much greater.
 -- Honolulu and Pittsburgh were among the lowest-bankruptcy urban areas. But smaller towns more typically had the lowest filing rates. By contrast, a number of large cities were among the most-bankrupt places, including Birmingham, Atlanta, Indianapolis, and Las Vegas.
 -- New England states and cities, among the lowest in bankruptcy rates at year-end 1989, moved closer to the middle of the pack by March, yet still showed lower rates than the national average. New Jersey and Florida also showed major upward movements. California's rate was higher than average both before and since that state's recent economic troubles flared.
 -- In some cases, different cities within the same state showed surprising results. Over the 10 quarters covered by the study, for example, Altoona and Lancaster, Pa., showed nearly identical and very low bankruptcy filing rates -- 1.20 and 1.19 per 1,000 residents, respectively. Yet over the same period, Altoona's average unemployment rate was a steep 8.15 percent, while Lancaster's average unemployment rate was only 4.73 percent.
 -- Despite high unemployment and white collar layoffs, New York City's average bankruptcy rate of 1.47 per 1,000 residents was less than half the national average rate of 3.03. By contrast, Indianapolis, with one of the lowest unemployment rates in the nation over the period, was 12th among 330 cities ranked by highest bankruptcy rates.
 SMR Research Corporation, based in Budd Lake, N.J., is the nation's largest publisher of strategic research studies on consumer loan and related markets. The Personal Bankruptcy Crisis, more than 200 pages, may be purchased directly from SMR at 201-691-1255. SMR also publishes The Consumer Credit Risk Quarterly, a periodical of consumer credit risk data.
 -0- 8/11/92
 /CONTACT: George R. Yacik of SMR Research, 201-691-1255/ CO: SMR Research Corporation ST: New Jersey IN: FIN SU: ECO


TS -- NY062 -- 8990 08/11/92 13:01 EDT
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