CREDIT CARDS MOST COMMON CULPRIT OF BANKRUPTCY INCREASES

CAPE GIRARDEAU -- Personal bankruptcies across the country are escalating rapidly. A total of 718,000 people filed bankruptcy proceedings in the U.S. last year, a 16 percent increase over the 1989 level.

Locally, the picture is one of even faster growth in filings. The case load for Southeast Missouri Division of the Eastern District of U.S. District Court shows bankruptcies in Cape Girardeau County surged 38 percent in 1990, up from 121 in 1989 to 167 last year.

And the trend so far this year is worsening. According to figures from Credit Bureaus of Southeast Missouri Inc., the rate of personal bankruptcy filings in the first quarter is up more than half over 1990 filings. The 1991 filings total 53, in contrast to 34 at the same point last year.

The current list contains people ranging from an unemployed construction worker with $219 in assets to a physician filing with $19,000 in assets and $527,000 in liabilities.

The reasons behind the steep upward slope on the graph vary with different sources one talks with. For many people caught in the snare of excessive debt, filing for bankruptcy involves a combination of factors.

The most common culprit is the out-of-control use of credit cards.

"Abuse of credit cards," replied Bob Klimt Jr. of Consumer Credit Counselors' St. Louis headquarters when asked the main reason for the escalation. The organization counsels people with debt problems to avoid bankruptcy. "People don't think of the later payments. Americans want things right away."

Persons owning several cards can sink deeper. "Some people use cash advances from one card to pay the other card," he added. "I have seen clients in here with $10,000 to $15,000 they owe in interest on credit cards."

Local attorney Richard Goldstein, who handles personal bankruptcies, agrees with Klimt. "We see people with several credit cards charged to the max," he said. "There is no way they can pay the cards off. Then they wake up one morning and realize they are in way over their heads."

Both identify a relatively recent development, the diminishing stigma of bankruptcy, as a factor in the increase. "A generation ago, a person declaring bankruptcy was a social pariah," Klimt commented. "There is less of a stigma now." Also, people see many large corporations declaring bankruptcies and sense that it is more acceptable.

One contributing reason to the rash is the layoffs and work curtailments since the recession started. People who never thought they could be in economic jeopardy can be surprised. "People who are on the edge to begin with, just making ends meet, can't make it when a wage earner has a layoff or hours cut back," Goldstein explained. "I have seen an increase in this the last six months."

Another unexpected economic setback, high bills caused by a medical problem, can force people into the situation. While some doctors and hospitals are more understanding, some do not hesitate to file lawsuits against patients, he said. People without medical insurance, or those with a family member having problems that may not be covered by insurance, such as mental therapy, are much more at risk.

Klimt said the St. Louis offices of his company have had a significant increase in the number of inquiries for help. Currently, there are more than 5,000 clients in that office's case load. Consumer Credit Counselors opened an office here this month.

A person can file for little more than $500. Court filing fees are $125 and attorney fees range between $400 and $1,000.

The debtor has the right to retain up to $8,000 in equity in his home, $500 in a motor vehicle, $1,000 in personal property and $400 in miscellaneous exemptions, Goldstein explained. Social Security and disability benefits are exempt. Debts such as alimony, child support and taxes still must be paid. A person can file no more often than every six years.

"Yes, it's a black mark on your credit record, but it's not economic suicide," the attorney said. "Your credit record may be shot anyway. People can get loans with a bankruptcy on their record, depending on the individual lender, but it's not as easy."