November 25, 2009 / 8:00 PM / in 8 years

U.S. bankruptcies rise 33 percent in third quarter

NEW YORK (Reuters) - U.S. bankruptcy filings rose 33 percent in the third quarter to the highest number since 2005, government data show, as rising unemployment and tight credit made it more difficult for consumers and businesses to stay current on their debts.

“With unemployment surpassing 10 percent and credit to businesses remaining tight, consumers and businesses are increasingly turning to the financial relief of bankruptcy,” said Samuel Gerdano, executive director of the nonpartisan American Bankruptcy Institute, in a statement.

There were 388,485 filings in the July-to-September period, up from 292,291 a year earlier and up 2 percent from the second quarter’s 381,073, according to data released Wednesday by the Administrative Office of the U.S. Courts.

Consumer filings rose 33 percent to 373,308 from 280,787 a year earlier, while business filings increased 32 percent to 15,177 from 11,504.

For the first nine months of 2009, there were 1,100,035 bankruptcy filings, up 35 percent from a year earlier. The 45,510 business bankruptcies in that period surpass the 43,546 total for the entire 2008 year.

Among the larger businesses to file this year have been automakers General Motors Corp and Chrysler LLC, mall owner General Growth Properties Inc GGWPQ.PK, telecommunications company Nortel Networks Corp NRTLQ.PK, and after the end of the third quarter, finance company CIT Group Inc CITGQ.PK on November 1.

Filings in the third quarter were the most in a three-month period since the record 667,431 in the fourth quarter of 2005.

Most of those came in the first two weeks of that quarter, prior to a U.S. Bankruptcy Code overhaul that was backed by credit card companies and designed to curb perceived abuses.

Some politicians have called for a rollback of some of the changes, which they say have added to consumer hardships.

In the third quarter, about 71 percent of bankruptcy filings came under Chapter 7 of the code, 28 percent under Chapter 13, and most of the rest under Chapter 11.

Chapter 7 is often used by consumers seeking a fresh start on their financial lives. Chapter 13 lets people discharge some debts. Businesses often use Chapters 7 and 11. Farmers use another part of the code, Chapter 12.

According to the government data, there were 4.52 Chapter 7 and Chapter 13 filings per 1,000 population in the year ended September 30.

Nevada, one of the states hardest hit by housing and commercial real estate problems, led with a 10.49 percent per capita rate, followed by Tennessee and Georgia.

Tennessee’s rate is high because its laws make it easier for creditors to attach debtors’ wages. California ranked 13th per capita, Florida 15th and New York 40th.

Reporting by Jonathan Stempel and Chelsea Emery; Editing by Phil Berlowitz

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