Aug. 10 (Bloomberg) -- Consumer bankruptcies show no sign
of abating after rising more than a third this year and may hit
1.4 million by Dec. 31 as jobs are lost and loans are harder to
get, according to the American Bankruptcy Institute.
More than 126,000 consumers filed for bankruptcy in the
U.S. last month, 34 percent more than in July 2008, the ABI said
in its latest report on Aug. 4. The increase came after a
36.5 percent rise in personal bankruptcies nationwide in the
first six months, to 675,351, according to the ABI research
group, which interprets data collected by the National
Bankruptcy Research Center.

“Rising unemployment on top of high pre-existing debt
burdens is a formula for higher bankruptcies through the end of
this year,” ABI Executive Director Samuel Gerdano said in a
statement. The group, composed of lawyers, accountants, bankers
and judges, is based in Alexandria, Virginia.

Debt problems don’t stop with sub-prime borrowers.
Celebrities who filed for bankruptcy in July included movie
actor Stephen Baldwin, who sought protection from creditors
after lenders began foreclosure procedures against his home.
Lenny Dykstra filed for Chapter 11 bankruptcy in a petition that
says the former Major League Baseball All-Star owes between
$10 million and $50 million.

Banks Hurt

Also last month, con man lawyer Marc Dreier’s luxury
Manhattan condominium sold for $8.2 million, 21 percent less
than what he paid two years ago, in an auction at U.S.
Bankruptcy Court in Manhattan. Proceeds will be used to pay
creditors in Dreier’s bankruptcy case and victims of Dreier’s
fraud, said Salvatore LaMonica, trustee in the Chapter 7
bankruptcy case.

Steeply rising filings by consumers are hurting commercial
banks. JPMorgan Chase & Co., the second-largest U.S. bank,
predicted more losses on consumer loans last month even as it
announced a rise in second-quarter profit on record investment
banking fees. Chief Executive Officer Jamie Dimon said he
doesn’t expect the credit card business to make a profit this
year or in 2010, and the company increased its loss projections
for prime and subprime mortgages.

Credit Card Losses

JPMorgan said losses in its Chase credit-card portfolio may
be 10 percent next quarter and will be “highly dependent” on
unemployment after that. Losses for cards issued by Washington
Mutual, which the bank acquired in September, may reach
24 percent by the end of the year, the company said.

JPMorgan’s credit cards lost $672 million, compared with
income of $250 million in the second quarter last year. Home-
equity charge-offs climbed to $1.3 billion, or 4.61 percent.
Prime mortgage defaults rose to $481 million, or 3.07 percent,
from $104 million, or 1.08 percent a year earlier.

Dimon, 53, said the company supported “proper consumer
protection” and that pending legislation setting up an agency
to monitor consumer lending practices would hurt short-term
profits in credit cards.

Congress, in October 2005, enacted the Bankruptcy Abuse
Prevention and Consumer Protection Act, a legislative reform
package intended to make it harder for consumers to get court
orders wiping out their uncollateralized debt.

The act required debt counseling and a means test for
would-be filers.
----