Inside bankruptcy court at Charlotte's federal courthouse one recent morning, a man in faded jeans was begging his attorney not to abandon his case.
Tim Beaver, a wiry mechanic with close-cropped hair, said he had invested a lot in a new garage near downtown Gastonia. The payments, along with other bills, a few months of slow business and the rising cost of gas had overwhelmed him.
“I'm not a businessman,” he said, his voice cracking. “There's only so much money a person can make.”
Scenes like this one are playing out more often in Mecklenburg courtrooms, with bankruptcy filings surging as the slumping economy stretches businesses and individuals. Experts say the worst is probably yet to come, because each economic slide takes a few months to push people into bankruptcy.
There were 3,122 bankruptcy filings in the Western District of North Carolina from January through June, up more than 11percent over the same period last year, according to figures from the district bankruptcy administrator's office.
Chapter 7 filings – personal bankruptcies – were up 17.5 percent the first six months of the year.
Nationally, filings were up more than 26 percent in the first quarter this year over the same period last year, according to the American Bankruptcy Institute. Chapter 7 filings were up 34percent the first quarter. The increases come even after a 2005 law made filing for bankruptcy more difficult.
Charlotte is faring better than other parts of the region, where manufacturing jobs have disappeared.
Still, the economy is forcing a growing number of individuals, restaurateurs and other small-business owners to file for bankruptcy protection, said Martin Hunter, a bankruptcy attorney with Shuford Hunter in Charlotte. His business is up 20 to 25 percent, he said.
Usually sick, divorced or unemployed in years past, today's bankruptcy clients are also homeowners and people “who were formerly considered well off,” Martin said.
The average American in financial distress is married, 35 to 44 years old and employed, with a high school diploma or some college, according to a 2007 report from the Institute for Financial Literacy, a nonprofit financial education organization.
Beaver, the mechanic, is an Army veteran who loves cars and wants to work, rather than draw from his disability pay, he said.
“That's my life,” he said later. “You take that away from me, you take away my life.”
The handful of others in the courtroom that day, scattered along the low, wooden benches, had similar stories. They rose, one after the other, to talk to the judge, and then filed out of the room, whispering with their attorneys. In a courtroom across the hall, a string of lawyers and struggling clients were trying to convince their creditors not to foreclose on their homes.
In one case that day, a 20-year military veteran, wounded in Iraq, needed to catch up on his house payments. In another, a doctor's wellness center had filed for bankruptcy protection two years ago and still hadn't resolved its financial issues.
One woman whose case was heard in court, Charmalle Little, filed for bankruptcy protection recently, struggling to keep up with her credit card and house payments, she said.
She was going through a divorce, caring for her five children and trying to stay afloat in the slowing economy.
“The cost of gas has gone up, so the cost of transporting back and forth to work went up,” said Little, 35, a systems analyst who lives in north Charlotte. “The cost of groceries went up. Dealing with those immediate needs takes away from your disposable income.”
Also, “for me, it was the change of family status,” she said. “Having your income cut in half significantly affects you.”
Since the court process began, Little has come up with a five-year plan for making her payments, and things have started to turn around, she said.
“You get a grasp on what's going on and get your feet back on the ground,” she said. “What I hope for is a clean start.”
Businesses have felt the pinch, too. There's been a “significant spike” in business bankruptcy filings nationwide, but because they can lag personal bankruptcies in tight economic times, the increase isn't as big as some would think, said Chip Ford, a partner in the bankruptcy practice at Parker Poe Adams & Bernstein.
“That's not necessarily an indicator that the economy is better than we expected,” he said. “It just means it's not happening yet, the big flood. It seems to take a while to ratchet its way up from consumers to the rest of the economic chain.”
Still, business bankruptcies are climbing: 8,713 were filed in the first quarter nationwide, up almost 39 percent from the first quarter of 2007 and more than double the number of filings in the first quarter of 2006, according to the American Bankruptcy Institute.
In Charlotte, more and more recent cases have involved developers and homebuilders who have filed for bankruptcy protection to prevent or delay foreclosure, Ford said.
Experts say personal and business filings could rise this fall and continue to increase for the next year or two, even if the economy starts to turn around before then.
“We have not come close to the bottom yet,” said Rick Mitchell, a bankruptcy attorney with Mitchell & Culp. “It's going to be a while longer before we do.”