Chapter 11 filings in 3rd quarter climb 35%

U.S. business bankruptcies rose 35% in the third quarter from a year earlier and are likely to climb further in the current period as the slumping housing market and rising energy prices take a toll, according to a study released Wednesday.

The study, by credit insurer Euler Hermes ACI, found that 7,167 U.S. businesses filed for bankruptcy protection during the quarter, up 7% from the second quarter and bringing the total number of filings for the first nine months of the year to 20,152.

The sharp increase reflects an unusually low level of bankruptcy activity last year. After a legal change, 19,695 companies sought U.S. Bankruptcy Court protection in 2006. That number had generally ranged from 35,000 to 40,000 since 1998, according to Euler Hermes ACI.

The credit insurer forecast that 30,000 U.S. companies would file for Chapter 11 protection by year’s end.

“It’s too much for the economy all at once to bear: high oil prices, inverted yield curve and this burst asset bubble in the housing market,” said Daniel North, chief economist at Euler Hermes ACI, a unit of France’s Euler Hermes.

Bankruptcy has hit sub-prime home loan providers hard this year, with more than a dozen seeking court protection after facing surging default rates on their mortgages to borrowers with less-than-stellar credit ratings.

The U.S. housing market has been in a slump for more than two years and oil prices have flirted with the $100-a-barrel mark in recent weeks, although they have since pulled back from record highs.

The Treasury market’s yield curve is said to be inverted when short-term securities yield more than their longer-term counterparts. That historically has been a sign of a higher risk of recession. In the U.S., the yield curve was inverted early this year.

North said he expected the number of bankruptcy filings to continue to climb next year.