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Sep10
Fewer Bankruptcy Filings

It's a fairly well-known truth: Don't give incentives for an activity and you'll get less of it. Case and point.

Bankruptcy filings fell more than 9 percent in the last year and reached the lowest level in about five years, according to data released Monday by the Administrative Office of the U.S. Courts.

Changes last year in the bankruptcy laws are having an effect.

During the 12-month period that ended June 30, there were about 1.5 million bankruptcy cases filed in federal courts compared with more than 1.6 million in the year-ago period.

It was the smallest number of filings since the 12-month period ended September 2001, according to the federal court data.

Now it's not as easy to skate on obligations, so it makes sense to stay the course. If you're still going to have to pay your debts, why file bankruptcy and have that added to your record as well.

There were 31,562 businesses that filed for bankruptcy, a 2.6 percent decrease compared with 32,406 in the year-ago period.

Filings under Chapters 7, 11, and 13 all fell, while only Chapter 12 filings rose with 360 compared with 290 in the year-ago period. Chapter 12 is an extension of Chapter 11, which protects companies from creditors' lawsuits while reorganizing, and applies to family farms.

Most importantly, I hope this will give unscrupulous business owners less "incentive" to cut and run after spending their company into disaster.


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