Some consumers trapped by low rates

Wednesday, Dec. 3, 2003 | 10:59 a.m.

Low interest rates that have helped more consumers buy and refinance homes and purchase extra goods on credit may also be playing a role in soaring bankruptcy rates, a Las Vegas attorney says.

Candace Carlyon, who has practiced law in Las Vegas for 20 years and specializes in bankruptcy cases with partner James Patrick Shea, said interest rates that plunged in recent years have enabled consumers to take on more debt, digging financial holes from which they've been unable to climb out of.

"We're seeing a lot more individuals that have credit card debt in excess of their annual income," Carlyon said. "It's almost impossible to recover from that."

Carlyon said attorneys have seen an unusual trend in bankruptcy filings this year -- while personal filings have soared, commercial filings are down in Clark County.

Recently released statistics from the Administrative Office of the U.S. Courts indicate that 20,361 bankruptcy filings have occurred in the state in the 12 months ending Sept. 30, 2003.

An analysis by the Chicago Tribune took population shifts into account over the year and determined that Nevada had 22.2 bankruptcy filings per 1,000 households -- a rate that is third highest in the United States behind Utah (27.2 per thousand) and Tennessee (25.1 per thousand).

In the Las Vegas office of the U.S. Bankruptcy Court, there were 13,562 filings logged through the end of October, a 7.9 percent increase over the 12,565 cases recorded in the first 10 months of 2002. But Carlyon said during that same period, there were only 75 business filings compared with 118 during the same time frame a year ago.

She explained that the Southern Nevada economy has generally been strong in 2003 and that during weak periods, businesses are more likely to lay off employees and, eventually, file for protection from creditors. During a weak economy, she said, personal bankruptcies generally occur months after business filings as laid-off employees struggle to make ends meet after a company has had its own struggles.

But with personal filings up and business filings down, Carlyon concludes that easy availability of credit has played a major role in the increase.

She also said she suspects attorney advertising also is behind the greater number of filings.

"This is strictly on personal observation, but I've noticed that some firms are being more aggressive in advertising bankruptcy protection as a means for solving financial problems," Carlyon said.

"There's been a lot of aggressive advertising in areas of Chapter 7 (in which property is liquidated to repay creditors) and Chapter 13 (which enables creditors to be paid in installments)," Carlyon said. "These are all very skilled practitioners, but when you see a lot of advertising, it may be creating more of a tendency for people to file."

Other bankruptcy experts have said that some people moving to Nevada in search of employment tap all their savings to make the move, then have to resort to bankruptcy protection when economic times get rough.

Others have cited problem gambling as a possible reason why Nevada is in the top tier of personal bankruptcy filings.