NEW BANKRUPTCY FILINGS continue to climb to unprecedented levels. From a peak of approximately 800,000 annual filings during the height of the last recession, annual filings increased to approximately 1.5 million in 2001 and climbed almost 6 percent to approximately 1.58 million in 2002.

In New Hampshire, 2002 filings for all categories of bankruptcy protection totaled 4,018 filings, a 3.37 percent rise from 2001, but far short of the peak years of 1997 and 1998, when there were nearly 5,000 filings, and slightly below the 4,044 filings posted in 1999.

Nationwide, personal filings continue to represent approximately 97 percent of the new filings and Chapter 11 reorganizations of businesses continue to represent approximately 1 percent of all filings. Similar percentages exist in the Granite State.

As in the last recession, it appears that the increase in availability of credit has combined with a sluggish U.S. economy to cause more people to seek protection under the United States Bankruptcy Code, according to New York bankruptcy attorney Myles Alderman. Before the beginning of the recession of the late 1980s, consumer debt payments increased to a high of approximately 14 percent of disposable income. That rate dropped to less than 12 percent before the historic economic expansion of the 1990s. According to the Federal Reserve Bank, consumer debt payments rose to over 14 percent again during 2001, as the current spike in filings became apparent.

While business bankruptcies represent a small fraction of new cases, their size represents a significant share of the economy. The largest cases today dwarf those of the past. Four of the 15 largest Chapter 11 Reorganizations filed during the past two decades were filed in the last two years - with combined assets of more than $100 billion dollars.

"As customers file for bankruptcy, businesses face an increased risk of bad-debt write-offs and disgorgement of funds collected under bankruptcy avoidance powers," Alderman said. "The increase in bankruptcies is substantial. In response, we are reminding our clients of the importance of proper credit and recovery policies to minimize the risk of both nonpayment and disgorgement."

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