SOUTH BEND — It's the latest sign of the still faltering economy: with unemployment and foreclosures still on the rise, hundreds across the area are suddenly turning to the only option they have left: bankruptcy.

An Associated Press analysis released Tuesday shows U.S. bankruptcy filings up an astounding 46% from March of 2008 to March of 2009. The jump is an even more dramatic 81% since March of 2007.

In the South Bend metro area, the news is even worse, reflecting a 64% increase over the same 12 month period, according to figures provided by Bankruptcy Trustee for the Northern District of Indiana Debra Miller.

589 consumer bankruptcies were filed in the South Bend division in March 2009, including 527 Chapter 7 bankruptcies and 64 Chapter 13 bankruptcies.

That's 17% higher than the increase recorded in the Fort Wayne division and 21% higher than the increase in the Hammond division.

And, some economists think the numbers may still get worse.

University of Illinois Law Professor Bob Lawless told the AP that bankruptcies could reach 1.5 million this year and level off at 1.6 million next year, as economists expect an economic recovery to begin.

Congress voted in 2005 to make bankruptcy more cumbersome after years of intense lobbying from the nation’s lenders, who complained that people were abusing the system. Before the move to change the law, bankruptcies were running at what was then an all-time high of about 1.6 million a year.

The tighter requirements initially appeared to work, with bankruptcies plummeting from a record-shattering 2 million cases in 2005 as consumers rushed to file before the new law took effect, to 600,000 in 2006.

But now bankruptcies are booming again, as an increasing number of consumers are faced with a tough choice: sink or swim?

Walter Cueto is one of them.

Five months ago, the Middlebury resident was on top of the world, working as a successful designer for an RV manufacturer in Elkhart County.

But, then the recession hit.

He lost his job on November 19th, and it didn't take long for everything to come crashing down. Since then, life has been a daily struggle.

"It's been horrible," Cueto said. "I've been putting in 25 applications a week, and nothing's been responding. We're a single income family. My wife is an at home mom and we have 4 kids. So, the bills have been piling up quick."

Quicker than he thought they would.

From credit cards to utilities and the mortgage payment, last month, he found they all added up to an unthinkable choice:

"It came down to: lose the house, lose everything or file [for bankruptcy,]" he said. "Today, I'm filing for Chapter 7."

He isn't alone.

Cases just like Cueto's have kept South Bend Bankruptcy Attorney James Tamke buried in paperwork lately.

"It's the highest it's been since the law changed in 2005, and probably for 20 years before that," said Tamke of his workload over the last few months.

"We've been working Saturdays, working until 7 o'clock every night and we still can't seem to have enough hours in the day to do what we have to do for our clients," he continued.

And the story from his clients is almost always the same.

"It's a remedy of last resort. They've tried everything. They've tried to negotiate with their creditors. It's gotten to the point where it's just so overwhelming that bankruptcy is their only realistic option. Some of them break down and cry, and it's obviously something they never planned to do. But, it's something they have to do to get a fresh start for their families," Tamke said.

And it's not just the unemployed who are finding it difficult to pay the bills.

"We're seeing a lot of 2nd and 3rd time filers that are coming back. Even though they don't qualify for a discharge under bankruptcy, they need to file a Chapter 13, where they can get more time to pay their debts. They just don't have the income to pay their minimum payments on time," Tamke said.

It's one reason why the numbers continue to skyrocket.

According to the AP analysis, Hoosier bankruptcy filings are up 41% over the last 12 months. It may seem like a huge jump, but the percentage increase only ranks Indiana as the 27th highest of the 50 states and the District of Columbia.

Michigan's rank is much higher at 16th, following a 50% jump in the last year, according to the AP.

But, because Indiana already had an above average rate of bankruptcy filings, another measure has local economists furrowing their brows much more.

Indiana recorded 4,904 bankruptcy filings in March 2009, the 8th highest in the nation.

"That is a concern, because [bankruptcies] tend to accelerate rapidly during periods of high unemployment. And, so that is the real linkage: high unemployment, high bankruptcy. It also means we probably won't see a lot of improvement until the jobless rate gets better," said Saint Mary's College Economics Professor Dr. Jerome McElroy.

"It's perhaps another indication of our over-leveraged society, and a repercussion of some serious lending problems over the last few years. I would anticipate many of those filing are in credit card debt, then they lost their jobs and now can't pay. What out do they have left, but to declare bankruptcy?" Dr. McElroy continued.

It's a scenario Cueto is very familiar with, because it's the one he now finds himself in.

"I'm at a point where, yes, I have no other choice but to do this. It's unfortunate, but it's got to be done," he said.

Still, he's staying optimistic, while working on his bachelor's degree in engineering. His hope now, that there will still be room at the "top of the world" when he's done.

"I'm a fighter, and I think as a country we fight," Cueto said. "Something will turn up."

The Associated Press contributed to this report