Americans Go For Broke Over Nations Latest Trend

Forget cigar lounges, Beanie Babies and sports utility vehicles. The hottest trend sweeping the US is filing for personal bankruptcy. According to figures published by the Visa payment card association on Tuesday, the number of Americans declaring themselves bankrupt shot up by 19 per cent to 1.34 million last year - more than at any time in the nations history, including the Great Depression.The amount of household debt discharged by bankruptcy courts rose even more steeply, from $30 billion (18.10 billion) the year before to $40 billion. That cost was ultimately passed on to other consumers in the form of higher retail prices or higher borrowing costs, Visa said. Unfortunately, more Americans than ever before are pursuing bankruptcy as a first option to solve their financial difficulty instead of a last resort, said Kenneth Crone, senior vice-president of Visa USA. Usually, high levels of personal bankruptcy accompany unemployment and recession. But Americans are going bankrupt in record numbers at a time when the US economy has experienced one of its longest-ever periods of uninterrupted growth. The proportion filing last year represented about one in 200 of the population, far exceeding the rate in other western countries. In the UK, fewer than 30,000 people declared themselves bankrupt in 1995, representing about one in 2,000 of the population. One reason is that bankruptcy is a relatively painless exercise in the US, and has come to be regarded as a sensible financial planning tool rather than a cause for shame or disgrace. Across the US, lawyers place advertisements inviting people to solve their financial problems with a bankruptcy. A toll-free call to the number 1-800-BANKRUPT puts people in touch with a local attorney. Visa is backing pending Congress laws that would require courts to inform debtors of alternatives to bankruptcy, such as credit counselling. It also wants them to repay debts at levels they can afford. FT