Personal and Commercial Bankruptcies on the Rise

The October numbers are out, and both personal and commercial bankruptcies continue to rise. Experts told CNN and the Wall Street Journal they expect this trend will continue throughout the rest year.

Small businesses are still struggling to survive, as shown in the seven percent rise in business filings last month. Many businesses have been struggling to obtain financing and loans due to tight credit markets, and things may be getting worse.

With major small-business loan provider CIT Group recently filing Chapter 11 bankruptcy many small and medium-size businesses wonder where they will turn for financing. The CIT bankruptcy was one of the largest in this country’s history, and they were  key source of financing for mid-size companies.

A total number of 7,771 businesses filed for bankruptcy during the past month. This was an increase from from the 7,271 filings during the previous month of September.

Some of the industries that have been hit the hardest are real estate and retail. But many other industries have been affected as well such as manufacturing and home building.

California seems to be the state that has been most affected and has the most commercial bankruptcies filings, the Wall Street Journal reports.

Personal bankruptcies are also on the rise. More personal bankruptcy filings were reported in October than any month in the last four years. In all, 135,914 peopled filed for bankruptcy protection.

While the stock market has seen some recovery, job losses remain high. Congress recently extended the unemployment benefits, but more people are going longer without jobs.

And while aid packages for first-time home buyers continue, there is little help besides bankruptcy for home owners facing foreclosure. Credit card bills and interest rates remain high, and many people are facing dwindling savings accounts.

Maureen Thompson – legislative director for the National Association of Consumer Bankruptcy Attorneys – told CNN “People are still carrying a lot of debt in terms of credit cards and home equity loans, and unemployment is still rising.”

According to CNN, the last time that personal bankruptcies were this high was in October of 2005 due to state legislation that made it more difficult for consumers to prove they needed to file for Chapter 7 bankruptcy and clear their debts. Many were forced to file for chapter 13 and set up a repayment plan for five years.

Experts are forecasting the number of personal bankruptcies to surpass 1.4 million in 2009. Until the economy provides more jobs, personal bankruptcies might be on the rise. Personal bankruptcies affect businesses. If consumers cannot afford to spend their money, then businesses start to suffer.