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Across the nation, bankruptcy filings beginning to ebb

In the first half of '99, filings were down nationally and in the Tampa Bay area. Experts warn: The reversal may be temporary.

The nation's tidal wave of bankruptcy filings is losing momentum. Filings declined both in the Tampa Bay area and nationally in the first half of 1999, reversing a longtime trend.

But bankruptcy experts say the trend is too new to celebrate. It could be a lull in the storm, since U.S. consumers are still more than $1.3-trillion in debt.

Indeed, there are worries about what will happen if the economy slows, since some of those debtors are one financial catastrophe away from a bankruptcy filing.

"This is not a time to be popping champagne," said Samuel J. Gerdano, executive director of the American Bankruptcy Institute in Alexandria, Va.

More than 10-million Americans have filed for bankruptcy protection in the 1990s, generating a business boom for bankruptcy lawyers and cries for reform from lenders who say it is too easy for borrowers to walk away from their debts.

Through it all, the bankruptcy court's Middle District of Florida, which includes the Tampa Bay area, has been one of the nation's busiest.

But now the trend to ever-increasing filings appears to be reversing. Compared to the first six months of last year, 1999 filings are down 7 percent nationally and down 4 percent in the Middle District.

"The pendulum swung way off in one direction and it's coming back the other way," said Ginnie Van Kesteren, a St. Petersburg bankruptcy lawyer.

Still, filings have fallen before, only to pick up steam again. Filings declined in 1993 and 1994, then resumed their surge, hitting records in 1996, 1997 and 1998.

This year's falloff could reduce some of the pressure on Congress to make it tougher for people to file, Gerdano said. Credit card companies and other lenders want to force many people to sign up for debt repayment plans instead, but many consumer groups oppose the measure, saying few people who file have the means to make repayment.

This year's trend is consistent with the improvement in other consumer finance statistics. Delinquencies for mortgages, home-equity credit lines and car loans all were down during the first quarter, as were credit card delinquencies in dollar terms, though not in the number of accounts.

Lower unemployment rates mean more people can make their required loan payments. Low interest rates also have allowed many to reduce their borrowing costs by transferring debt from one credit card to another or consolidating debt with a home equity loan.

The numbers show the situation's improvement. Through June 30, 21,442 bankruptcy cases were filed in the Middle District, 932 fewer than in the first six months of 1998. That includes 462 business filings, 145 fewer than last year.

Nationally, there were 676,740 filings during the first six months, 50,838 fewer than last year.

Still, many people remain a paycheck or two from financial disaster.

"In at least nine out of 10 cases, the reason (for bankruptcy) is too much credit card debt and something has happened in their life: the loss of a job, divorce or illness," said St. Petersburg bankruptcy lawyer Jay Verona. "As long as banks continue to give credit cards out like candy, I don't think it matters how good the economy is."

While bankruptcy no longer carries the social stigma it once did, it may be losing some of its popularity as a quick fix for serious financial problems.

"Word is getting out that bankruptcy is not always the answer and that it does have lasting repercussions," said Patricia Nurse, president of Consumer Credit Counseling of the Florida Suncoast. "Bankruptcy stays on your credit record for 10 years. That doesn't necessarily mean you won't get credit, but your options will be limited."

At the same time, fewer people are coming to the counseling service for help with their credit card debt, a trend she attributes partly to the popularity of debt consolidation through home equity loans and mortgage refinancing.

The strong economy is also helping businesses stay in the black.

Another factor: More businesses may be negotiating settlements with their lenders as an alternative to bankruptcy filings, Van Kesteren said. She has seen a decline in real-estate-related filings, but bankruptcies by health care companies are on the increase.

One reason filings may be down is that so many people already have filed, Van Kesteren said. The most popular type of bankruptcy filing _ a Chapter 7 liquidation _ is off-limits for six years after it is used to discharge debts.

"There is a limit to the total population," she said.

_ Times staff writer Ameet Sachdev contributed to this report.

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