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More people go bankrupt in state Corporate insolvency declines in Md. as rate for individuals rises; Poor economy is blamed; Filings rise 13.5%, making state caseload heaviest in country


Maryland bankruptcies have increased briskly this year after declining in 1993 and 1994, showing more evidence of a stalled economy and presenting a huge workload for the federal court.

Bankruptcy filings rose by 13.5 percent for the nine months ended in September compared with the same period last year. Filings for the year ended in September went up by 8.8 percent, setting a record high.

The number of Maryland bankruptcies grew from 9,622 in 1990 to 16,753 in the year that ended Sept. 30, according to the U.S. Bankruptcy Court in Baltimore.

Filings, which tell stories of small businesses gone bad, crushing health care bills, underemployment and joblessness, are up 74 percent over the five-year period.

The volume has risen so sharply that Maryland's caseload here is heavier than in any other state, a recent federal study showed.

Maryland is one of only two states scheduled to receive a new permanent bankruptcy judge, bringing the number of judges at the Baltimore court to four. California is the other state getting a new judge, said Suzanne A. Bingham of Armstrong & Associates, a legislative consulting firm in Fairfax, Va.

"It's way overdue," said Frank L. Monge, the clerk of U.S. Bankruptcy Court in Baltimore. "We've had visiting judges who come in to help. Without them we'd be in worse shape."

The big workload has as much to do with understaffing as with the weakness in Maryland's economy. On a per-capita basis, the rise in bankruptcy filings here roughly parallels the increase in the rest of the country.

But the rising tide of filings isn't good news, either, reflecting declining federal spending, slow retail sales and other economic ills. Recently the state slightly surpassed the national average in per-capita bankruptcies for the first time in years.

"Maryland has never really come out of the recessionary period quite to the degree of most other states," said Gary Greenblatt, a Baltimore bankruptcy lawyer. "They've always had -- since the beginning of the 1990s -- a fairly high level of bankruptcies."

Individuals -- not businesses -- are hurting the most, bankruptcy statistics show. The figures reinforce evidence from recent state tax collections, corporate surveys and other sources showing a pattern of personal struggle in the midst of relative corporate prosperity.

Business bankruptcies in Maryland fell by 6.4 percent in the year ended June 30, compared with the previous 12 months, according to the Regional Economic Studies Program at the University of Baltimore.

Personal bankruptcies jumped by 7.5 percent for the period, the latest for which breakdowns were available. And they've continued to rise since then, Bankruptcy Court officials report.

The results do contain seeds of hope. The fact that corporate filings have fallen suggest that local companies may be in a good position to hire workers next year, said Michael Conte, director of the Regional Economic Studies Program at the University of Baltimore.

"If you believe that business is the goose that lays the golden egg, the generator of jobs, what this means is that next year

things are going to be different," Mr. Conte said.

"Basically we've had a lousy year," he added. "It's been very difficult to get a job. Wage growth has been very slow. Fortunately, it hasn't really shown up on the business side of the balance sheet. The rest of the United States has been buying our products."

Bankruptcy proceedings allow people and businesses to reorganize their debts and get a new start.

In some kinds of filings, bankrupts give up assets and pay creditors only a few cents on the dollar, if that.

In others, filers hold creditors at bay until they can rise above water and cure their defaults.

Whatever the type, a bankruptcy filing is usually a symptom of acute financial distress. Hence the interest of economists.

Few debtors in Bankruptcy Court are eager to talk about their problems publicly. But the voluminous files in Baltimore's federal LTC courthouse tell tales of crushed hopes, lost jobs, shopping addictions and meager incomes spread thinly for too long.

"The people that I see day after day in the creditors' meetings are out of work to a much larger extent than I've been seeing in the past," said Deborah H. Devan, a Baltimore lawyer who specializes in bankruptcy cases.

"If they still have a job they're in a certain amount of difficulty because they were used to getting a certain amount of overtime and now they're not getting overtime. And another thing you see are a lot of people without health insurance."

One woman without insurance got hurt in a car crash that was the other driver's fault. She couldn't cover the hospital bills and had to file.

In another family, a spouse got laid off just before their balloon mortgage payment came due. No bank would refinance their note.

Bills from Sears, Visa and Home Depot totaling well into five figures are frequent features of bankruptcy petitioners. But for the most part, recent filers "are not people that are out buying expensive stereos and furniture," Ms. Devan said. "They're paying for groceries and rent."

Many filers' finances were damaged in the last recession and never recovered. They've been on the brink since 1993 and only recently succumbed. "A lot of the small-company, single-proprietor outfits that were started in the wake of the last recession are . . . going belly up," Mr. Conte said.

Maryland unemployment hasn't risen much, suggesting that many of the bankruptcy petitioners still hold jobs but may be in poorer paying jobs or underemployed. In August, the state's jobless rate was 5 percent.

As for Maryland's four bankruptcy judges -- they're anything but unemployed.

The judges were too busy to return phone calls from a newspaper reporter. But late court sessions and courtrooms packed with debtors aren't unusual.

"If they go out to lunch it's not that frequent," Mr. Monge said. Last week a federal judge from North Dakota flew into town to help out for a few days.

The Bankruptcy Court's staff is maxed out, too, Mr. Monge said.

"They are signs of stress on the clerks," the court clerk said. "It's been difficult. There's been some slippage. It's just getting through it. You're not as able to focus."

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