More Individuals, Fewer Businesses File for Bankruptcy

More Californians, including those in Orange County, filed for bankruptcy protection last year than in the previous year, but the number of businesses going bankrupt fell dramatically, according to a survey released Wednesday.

Overall, individuals and companies filed 183,334 petitions last year, a 5.2% increase over 1994’s total cases, according to the survey by CDB Infotek, a Santa Ana public records service.

More telling, perhaps, is that individuals, who make up the bulk of filings, were much deeper in the hole than they had been the previous year. The median amount of debt they accumulated rose 22% to $60,170, Infotek said.

“I was surprised that the median amount of debt had increased,” said John Karevoll, a consultant to Infotek. “There’s a lot of distress out there, and I’m not sure a lot of other economic indicators show that.”

The higher bankruptcy figures counter the generally favorable assessments in recent months of the state’s economy, which accounts for more than 13% of the national economy. The unemployment rate has fallen, and personal income and tax collections have increased dramatically, leaving state coffers with an unexpected surplus.

“I don’t really understand it,” said David Hensley, a Salomon Bros. regional economist in New York who specializes in California. Hensley has been predicting vigorous growth for California.

He speculated that declining home values in some parts of the state, combined with the interest rate spike in 1994, might have been enough to push more people into bankruptcy a year later.

Karevoll said that residents borrowing on the equity in their homes seemed to make up a large part of the personal bankruptcies.

“Part of the buffer zone between you and destitution is the equity in your home,” he said, “and the economy has been sucked drier of ready cash than people comprehended.”

Filings varied widely among the state’s counties.

While overall filings in Orange County rose 2.9%--from 16,286 cases to 16,755--petitions in Los Angeles County dropped 2.9% from 55,945 cases to 54,300, according to the survey.

“Los Angeles was hit hard early by the economic downturn of a few years ago, and now they’re emerging,” Karevoll said. “Now, more residential and more rural counties that were not hit hard early on are hurting.”

The only other counties showing declines were San Francisco, San Mateo, Ventura, Merced, Marin and Lake.

Filings under the U.S. Bankruptcy Code’s Chapters 7 and 13 are typically reserved for individuals. Chapter 7 petitions statewide rose 6.1% to 144,261 last year from 136,932, while Chapter 13 cases rose 5.3% to 36,702 last year from 34,869. Business petitions under Chapter 11 dropped 22% to 2,870 last year from 3,814.

Associated Press contributed to this report.