WASHINGTON -- Bankruptcy filings continued to decline in the first three months of the year, but bank industry representatives said reform legislation is still needed to stem the tide of individuals seeking protection from creditors.

The 206,565 filings in the first calendar quarter is only five cases below the pace established during the final three months of 1993. And it is the tiniest drop recorded in a year.

Nonbusiness filings -- primarily consumer cases - totaled 192,707 for the quarter, slightly higher than the 192,617 filed in the preceding three months.

Business filings were almost the same, dropping to 13,858 from the 13,953 recorded in the final three months of 1993.

Trend Seen as Deceptive

Industry representatives expressed surprise that the rate of bankruptcy filings had essentially held steady during the three-month period, despite the fact that the economy is continuing to grow.

And they said the generally favorable trend in filings - which have been drifting downward since early 1992 - is not as good a piece of news as it might first appear.

"If you take a 10-year view, there are as many bankruptcy filings in a single quarter now as there used to be in an entire year," said Joe Belew, president of the Consumer Bankers Association.

"Filings are still at a pretty high plateau for a recovery," added Phillip Corwin, a lobbyist who follows consumer issues for the American Bankers Association.

The House Judiciary Committee is expected to begin work on a bankruptcy bill in July, and the legislation could reach the floor after the August recess. The Senate already has passed a bill.

Of particular interest to bankers, said Mr. Belew, are provisions that encourage consumers to file under Chapter 13 of the code, in which debts are reorganized, rather than Chapter 7.

In Chapter 7 cases, individuals are able to discharge debts.

According to the administrative office of the U.S. Courts, which released the bankruptcy data, Chapter 7 filings constituted an overwhelming majority of the cases recorded in the three month period. (The period is actually the second quarter under the fiscal year used by the courts.)

Nationwide, 142,035 cases were filed under Chapter 7, compared to the 60,279 cases filed under Chapter 13, the next largest category.

The Consumer Bankers are also interested in a provision that would bar "cramdowns," in which the principal value of mortgages is reduced to the market value of a property. As prices tumbled during the real estate recession, many properties were worth less than the amount for which they were mortgaged.

A federal court had ruled cramdowns illegal, but the Supreme Court overturned that decision, leaving the law unsettled, Mr. Belew said.

Mr. Corwin described the Senate bill as a major piece of legislation, with a number of important provisions for the banking industry.

Among other provisions, the bill would make it easier for bankruptcy courts to approve larger repayments plans, spread out over periods as long as five years, for farm bankruptcies.

The bill would also eliminate obstacles that now prevent the federal government from accepting credit cards for tax payments. Under current law, credit card debt can be discharged, or removed as an obligation.

The Senate bill makes it clear that credit card debt taken on for the purposes of paying taxes must be repaid. The bill also mandates repayment of credit card debt taken on within 60 days of a bankruptcy filing.

Both provisions are intended to prevent individuals who know they are about to file for bankruptcy from misusing their credit cards.

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