David Smith's favorite childhood toy was a cash register, and playing merchant was his favorite game.

At 23 he realized his boyhood fantasy when he started his own business in a converted coin-operated laundry. For the next 14 years he plowed everything he had into his company, sacrificed his social life and eventually moved his photo processing concern into a slick, sleek business park in Beltsville.

Now, Smith's life is dominated by debts instead of dreams. He has had to sell some equipment to pay bills, and he takes in boarders to help pay his house mortgage. When his company was threatened with eviction, Smith succumbed to a joyless, demeaning act few youthful entrepreneurs ever imagine: He filed for protection from his creditors in U.S. Bankruptcy Court.

"It's discouraging because I see how much work I put into the business and then I see how little, after all this labor, I have to show for it," said Smith, who is trying to reorganize and continue operating his business under Chapter 11 of the federal bankruptcy law. "It's like wandering in front of a rolling truck when you didn't know it was going to be here."

Smith is not alone. Chantilly business owner John Veverka said he felt the pain of laying off workers and dismantling a company he built from his basement up.

William Toten, who like Smith and Veverka is filing for protection from creditors in bankruptcy court in the hopes of saving his troubled Herndon defense firm, said he battles the debilitation of defeat every day with the challenge of starting over.

As bankruptcy court filings rise substantially in the Washington area, so does the anguish of people whose investment of profit and passion have resulted in failure.

Some filings result from mismanagement, stock fights, deaths of people heading small, family-run businesses and adverse judgments from lawsuits. Even in the best of economic times, the failure rate of small businesses is high.

But increasing numbers of companies also have been touched by the slowdown in the local economy. People with limited management or business skills who succeeded during the euphoric 1980s now are failing, their mistakes no longer masked by an economy so awash in wealth that even poorly managed businesses fared well.

Corporate and personal bankruptcy filings in the last five years have increased 129 percent in Eastern Virginia, 133 percent in Maryland and 48 percent in the District, according to the Administrative Office of the U.S. Courts.

Rather than go out of business, many companies file for Chapter 11 protection, which allows a company to reorganize under a court-approved plan and continue operating while creditors are kept at bay.

Despite the growing numbers of bankruptcies, many financially troubled business owners still feel the sting of personal failure when they resort to voluntary reorganization.

Starting a business was "something I wanted to do as a little kid," Smith said. "I always loved to play merchant. I got a cash register at 4 or 5. I always set up a snack bar at the local baseball diamond."

At age 17, he met a race track photographer who photographed horses, races and winner's-circle presentations at Pimlico, Bowie and Timonium tracks. Smith said he worked for the photographer, processing his film, and eventually went into business for himself at 23, starting in an 800-square-foot converted coin-operated laundry.

It was an exhilarating time for Smith.

"Business was going so good and things were so great and peachy," he said. Many of his customers were developers and architectural, design and aerial photography firms that needed photographs of construction and development sites and new homes for use in brochures and magazines.

When their fortunes rose, so did Smith's. He found himself working from 8 a.m. to 8 p.m. His business always came first.

"I found that I physically didn't have the time" to develop a social life, Smith said. "When you're working 12 hours a day, you go home, maybe, have something to eat, go to bed. I worked six days a week. Obviously I had some social life, but I never made a solid relationship happen."

The sacrifice paid off financially.

Smith said his company, Color Unlimited Inc., grew to 17 employees and sales topped $60,000 a month. Smith leased larger and larger spaces until he reached his present shop, which occupies 12,000 square feet in Beltsville.

He treated himself to a toy each month, such as an electronic keyboard, a videocassette recorder, a stereo and a large-screen television.

"When Halley's comet was here, I got a top-of-the-line electron telescope," Smith said.

He generally managed to accumulate savings, although the good times were disrupted once, in 1987, when building delays prevented him from moving to his new offices on schedule. The mix-up forced him to close his business for five months, costing him $300,000 in sales, Smith said -- a loss from which he said he never fully recovered.

Then last February, Smith said, he began to sense trouble. Sales dropped sharply as Smith's business felt the first effects of the real estate downturn.

"I checked myself: Was I properly dressed? Was there a thread on my clothes?" Smith said.

When his creditors told him other people were having difficulty paying bills, he felt a little satisfaction "that it wasn't just me."

Smith thought he had found someone to invest in the company, who could erase about $7,000 in monthly debt payments, but that deal fell through.

When his landlord threatened to evict him, he filed for court protection under Chapter 11 on Aug. 7, claiming assets of $55,000 and liabilities of $445,000. Chapter 11 protects him from claims by creditors -- including his landlord, while he reorganizes his business.

Smith sounds weary talking about what may happen to his company. He has several ideas, such as processing photos of family vacations and doing work for amateur camera clubs, jobs considered too unprofitable and menial a few years ago.

Smith said he has not always sure he was wise to follow his childhood dream, but he still wants to try to make it work.

"If I didn't enjoy it, I wouldn't have done it for so long," Smith said. "There's no substitute for holding the reins yourself. You can go for a ride with somebody and that's great, but there's no substitute for holding the reins." When John Veverka told his employees the bad news, he called them in one at a time.

"It was very saddening," said Veverka, part owner and president of Fair Oaks Electric Co. in Chantilly. For the first time he was laying off, not hiring, people at his company.

"I've never had to do that in my life," said Veverka, 34. "It was very sad to have to tell families that were dependent on a weekly paycheck that we had no more work for them."

After pondering the future of the company he started four years ago in his basement with a loan from his mother and four employees, Veverka filed Chapter 11 in October. Like Smith, owning a business had been one of Veverka's dreams since working part-time as an electrician while attending Herndon High School.

At its peak, Veverka's company, which specialized in wiring new homes, had 40 employees and $1.5 million in annual revenues. But, as construction of new homes cooled, he had to trim what many businesses consider their biggest expense -- people.

Over time, Veverka's work force was cut to 10. When he told employees they were laid off, some called him names and suggested colleagues who should be let go instead of themselves, Veverka said.

"I tried to keep personalities out of it," Veverka said. "It was strictly a business decision to lay people off. But it was still a difficult one at that."

Veverka filed for protection from creditors in bankruptcy court on Oct. 22. He said he felt, "quite frankly, like packing it in and looking for another career."

But he didn't.

"I suppose it's psychological," Veverka said. "It's something I just wasn't willing to give up. I had so much time and money invested into it."

There was more involved than sentiment. When Veverka started Fair Oaks Electric, he had to sign guarantees stating that he would pay the company's debts out of his personal assets if it ever ceased operation, he said.

He said he hopes that after the economy improves, people someday will look to his company with respect. "It would be rewarding to know that later on in years I had an established name that would be worth something," he said.

Deciding to file for bankruptcy is not easy. William Toten, a defense contracting executive, knows. He's handled two of them in as many years.

"It's a very hard soul-searching decision," said Toten, executive vice president of the Hitech Engineering Co. in Herndon, which entered Chapter 11 bankruptcy proceedings Sept. 24. "When you sign those papers, you tell those employees, vendors, you have failed in your mission.

"You have to come to the realization that what anyone has lost, they're going to lose more if you don't get on with trying to run the company and reorganize it to everyone's benefit," Toten said. "Licking your wounds and feeling sorry for yourself does not help anyone."

When Toten joined Hitech, the company already was on the verge of itsbankruptcy filing. Toten, a retired military man, was brought in to steer the company through the process.

Toten had been the chief executive of a similar Virginia company that filed for voluntary reorganization last year. That company was hurt when it had trouble raising capital because of a protracted legal dispute over stock ownership, Toten said. Both companies had been in the highly specialized and, at one point, lucrative field of selling and producing data processing and communications equipment that met federal security specifications.

Both businesses were hurt by the cutback in military spending by the federal government. Many of the companies' engineers were certified to work on just one program, overseen by the top-secret National Security Agency.

But Toten's job is to look forward, not back. He has to hire the bankruptcy lawyers, determine which of the employees should be kept and which should be let go, and handle the enormous amount of documentation, schedules and filings with the court, the Justice Department and the Securities and Exchange Commission.

What may be harder, however, will be finding a new mission for Hitech, because it can't depend on government sales.

Hitech is considering selling its expertise to authorized NATO countries or using its engineers' skills commercially, Toten said. The company, for example, could develop products to reduce radiation from computer screens, or develop portable computer parts.

In many ways, he said, re-creating a business is as exciting as starting from scratch.

"It challenges you all by itself, between the hardships of Chapter 11, the hardship it places upon our employees, our creditors, our shareholders," Toten said. "And then we still have a business to run. We believe we have a future to get on with. It sparks you all by yourself, every morning. You don't even need caffeine."