Tennessee bankruptcy rates highest in nation
Bankruptcy numbers over the past few months appear to be slowing down or leveling off in many regions. More than 73 percent of the nation’s federal court districts saw bankruptcy filings drop between May and June, according to Jupiter eSources, a company that tracks bankruptcy data. But bankruptcies continue to climb or remain elevated in the three highest-filing states in the country ‘ Tennessee, Georgia and Alabama.
In Tennessee, 5.8 residents out of every 1,000 file for bankruptcy on an annual basis, compared with the national average of 2.52 per 1,000. In Georgia and Alabama, the rates are 4.87 and 4.77, respectively.
Some experts say the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 may have little effect on filing rates in states with chronically high bankruptcy rates. Economic and social factors such as low-paying jobs and high divorce rates often lead to financial hardship, but local bankruptcy experts say the sheer frequency of filings may also be whittling down the social stigma of filing.
‘If your neighbor does it, it’s more likely you will do it,’ said Dena K. Wise, a family economics specialist at the University of Tennessee. ‘It may be that (bankruptcy) has become something common among some certain neighborhoods.’
Economic conditions play an important role in bankruptcy filings. But economics alone don’t explain the high rates in some southern states. Mississippi and Louisiana, for example, have the nation’s highest poverty rates. Yet the rate of consumer bankruptcy filings in those states is lower than in Georgia, Tennessee and Alabama. Mississippi’s rate is 3.46 filings per 1,000 people. Louisiana’s rate is 2.88 per 1,000.
Bankruptcy scholars offer two alternative explanations: the declining social stigma of filing for bankruptcy in some areas and the habits of local lawyers. Bankruptcy expert Robert Lawless, a law professor at the University of Illinois, said that many local lawyers tend to adhere to old filing traditions and may not consider alternative options.
No matter how poor an area is, Lawless said, lawyers are most often the figures guiding financially distressed residents through legal options. The recommendation for clients in financial distress is often Chapter 13 bankruptcy, which allows people to gradually pay off their debts.
Financial experts such as former Federal Reserve Chairman Alan Greenspan have suspected for years that declining social stigma is a cause of rising bankruptcy rates. During his testimony over bankruptcy code amendments which began in 1999, Greenspan told Congress that ‘personal bankruptcies are soaring because Americans have lost their sense of shame.’
Tennessee, Georgia and Alabama all boast divorce rates between 12.2 percent and 10.8 percent ‘ higher than the national average, according to the U.S. Census Bureau. All three states are among the poorest in the nation, with up to 17 percent of the state population living in poverty: almost four percentage points above the national average.