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Tracking Trends in Bankruptcy Cases

It happens all too frequently: Small-business owners plagued by economic difficulties are forced to declare bankruptcy. Increasingly, these individuals have been turning to the state courts.

The facts: There is a growing use of the state courts to settle bankruptcy cases instead of initiating insolvency proceedings in federal court. But according to the Small Business Administration, the annual number of small-business failures has stayed relatively consistent in recent years.

What is the reason for the trend? According to some legal experts, state bankruptcy courts have become more attractive in the wake of the federal Bankruptcy Abuse Prevention and Consumer Protection Act, which went into effect in 2005. Many of the new law changes were designed to protect unsecured creditors, but they also slowed down the process and may raise costs.

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