Credit problems aren't just for consumers

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I'm sure it comes as no surprise to you that individual consumers aren't the only ones having money problems these days. Businesses are struggling too, and it's showing in the bankruptcy numbers. One website reports that so far this year, 24 public companies have filed for bankruptcy protection, which is more than 60% higher than the same periods in 2006 and 2007.

What happens when the companies go into bankruptcy? Hopefully they are just looking for a little more time to pay their bills, and creditors eventually get the money that's owed to them. Most times, it doesn't go that way, though. The creditors race to get in line to see who is going to get paid and who is not. The creditors almost always lose at least some part of the money that's owed to them.

Why do you care? When a person or a company ditches out on the debt they owe, we all pay the price. Someone's got to make up the difference, and we will see increased prices for goods and services and higher interest rates for our financing. And issues with borrowers can impact markets around the world, as we have seen with subprime mortgage problems.

Not to mention the fact that the shareholders in the public companies filing for bankruptcy usually lose their investments. The effects of bankruptcy, especially corporate bankruptcy, are wide-reaching, and that's why consumers should care about the issue.

Tracy L. Coenen, CPA, MBA, CFE performs fraud examinations and financial investigations for her company Sequence Inc. Forensic Accounting, and is the author of Essentials of Corporate Fraud.
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