Bankruptcy filings rise 30% this year

Bankruptcy filings rose 30% during the government's 2008 fiscal year, which ended Sept. 30, according to figures released Monday by the Administrative Office of the U.S. Courts.

Total bankruptcy filings increased by 241,724 cases, or 30%, to 1.04 million in the 12 months between Oct. 1, 2007, and Sept. 30, 2008.

For the three months ended Sept. 30, total bankruptcies rose nearly 34% to 292,291, up from 218,909 in the same period last year. Fiscal fourth-quarter filings were up 60% from 182,973 in the previous quarter.

Non-business filings totaled just over 1 million for the year, up 30% from the 775,344 non-business filings in fiscal 2007. Business filings rose 49% to 38,651, up from 25,925 business filings in the previous 12-month period.

"The dramatic spike in both personal and business bankruptcies reflects an economy in distress," Samuel Gerdano, executive director of the American Bankruptcy Institution, said in a written statement.

Still, the 1.04 million filings for the 12 months ended in September are fewer than the 1.12 million filings the government fielded two years ago, for the 12 months ended in September 2006.

Bankruptcy filings surged in 2006 as businesses and individuals raced to file before the implementation of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005.

Total filings dropped nearly 28% in fiscal 2007 as the 2005 act, which made it harder for individuals to receive Chapter 7 bankruptcy protection, went into effect. But this year's tough financial environment ratcheted filings back up: Chapter 7 filings rose 40% to 679,982 in the 12 months that ended Sept. 30.

Chapter 7 bankruptcy is designed to give individual debtors a "fresh start" by discharging many of their debts. Under Chapter 7, a filer's assets - minus those exempted by his or her home state - are liquidated and given to the creditors who are first in line for repayment. Any debts that remain are cancelled.

Another type of individual bankruptcy, Chapter 13, requires debtors to pay back their debts over time. Chapter 13 filings rose 14% this year to 353,828, up from 310,802 a year earlier.

Filings for Chapter 11 bankruptcy, which is aimed at assisting struggling corporations or partnerships, rose 40% to 8,799 from 5,888

Note: All these posts are from CNN news.

Credit card crackdown coming soon

Cash-strapped consumers might get some welcome news on Thursday when regulators vote to rein in controversial credit card practices.

The proposed rules, which have received overwhelming consumer support, prohibit banks from practices like raising the interest rates on pre-existing credit card balances unless a payment is over 30 days late, and applying payments in a way that maximizes interest penalties.

The Federal Reserve Board, the Office of Thrift Supervision and the National Credit Union Administration, are all expected to approve the regulation. The rules are expected to take effect by 2010.

"It will fundamentally change the relationship between cardholders and banks," said Peter Garuccio, a spokesman from the American Bankers Association.

If approved, the Fed's rules will mean an end to double-cycle billing, which averages out the balance from two previous bills. That means that consumers who carry a balance can get hit with retroactive interest on their previous month's bill - even if they've already paid that off.

Consumers would also be given a reasonable amount of time to make payments, and payments would be applied to higher-rate balances first to reduce interest penalties and fees.

Credit card statements would clearly list the time of day that a payment is due, and any changes to accounts would be in bold or listed separately.

And, finally, no more universal defaults, a policy which allows credit card issuers to increase the interest rate on one card if a customer misses a payment on another card.