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When you think of bankruptcy, do you think of GM, Chrysler? But it's not just automakers facing bankruptcy this year; it's your co-worker, the guy down the street, maybe even you. A growing number within the country are facing bankruptcy now, according to figures released Wednesday by the Administrative Office of the U.S. Courts. For this year's July to September period, there were 388,485 bankruptcy filings, up from 292,291 a year earlier. This number was up 2% from the second quarter. This is the highest number since 2005.
What is to blame for the increase? The combination of 10% unemployment and tight credit is pushing the numbers higher for both individuals and businesses. Individual bankruptcies are up by 33% to 373,308 from 280,787 a year earlier, while business filings increased 32% to 15,177 from 11,504.
Filings rose most sharply in the third quarter due in part to a rush to file before changes in the Bankruptcy Code took effect. These changes were backed by credit card companies and designed to lessen "perceived abuses" in the system. Chapter 7 filings can still be used by individuals needing a fresh financial start. Business use both Chapters 7 and 11. A lesser known fact: farmers use Chapter 12 in their bankruptcy proceedings.
Nevada, which leads the nation in foreclosure rates, was also the state with the highest rate of bankruptcies at 10.49%. Tennessee and Georgia were the states with the second highest rates in the nation. Reuters reports that the Tennessee rate is high in part because its laws make it relatively easy for creditors to attach debtor's wages.
California and New York ranked 13th and 40th, respectively.