Tennessee still leads the nation in bankruptcies

Main states of bankruptcy

1. Tennessee – Bankruptcy filings fell 6% last year to 36,052 or 5.73 filings per 1,000 population

2. Alabama – Bankruptcy filings rose 2% last year to 25,249 – the largest increase of any state – or 5.36 filings per 1,000 people

3. Georgia – Bankruptcy filings fell 4% last year to 49,334 or 5.02 filings per 1,000 population.

4. Illinois – Bankruptcy filings fell 7% to 56,004 or 4.34 filings per 1,000 population

5. Utah – Bankruptcy filings fell 12% last year to 11,917 or 4.28 filings per 1,000 population

Source: American Bankruptcy Institute

Bankruptcy filings

The number of individuals and businesses filing for bankruptcy protection in the Chattanooga Division of U.S. Bankruptcy Court has declined each year since the 2009 peak in filings.

2015 – 5,747

2014 – 5,882

2013 – 6515

2012 – 6640

2011 – 7273

2010 – 7357

2009 – 8487

2008 – 7252

2007 – 5782

2006 – 4630

2005 – 8703

2004 – 8392

2003 – 8819

2002 – 8392

2001 – 8446

The number of Chattanoogans going bankrupt fell for the sixth straight year in 2015 as consumers took advantage of economic growth, cheaper gas prices and historically low interest rates to improve their financial situation.

But the drop in local bankruptcy filings last year was far less than the drop nationally, helping Tennessee remain the top state in bankruptcy rate again in 2015.

“Bankruptcy filings reached very high levels during the Great Recession, but we’ve seen filings decline in recent years as the economy improves,” said Larry Ahern, a bankruptcy attorney and consultant since. over four decades and Adjunct Professor of Law. at Vanderbilt University in Nashville. “Creditors and consumers have been more cautious about their debt levels at the same time as property values ​​and worker incomes have risen. Bankruptcy filings tend to reflect the overall economy.”

In Chattanooga, bankruptcy filings last year were down 2.3% from a year earlier and were a third below the record high reached at the height of the recession in 2009.

Nationally, bankruptcy filings fell more steeply, falling 10% last year to their lowest level since 2006. Last year was one of the lowest years for filings balance sheet in the United States over the past 25 years.

But bankruptcy experts say deposits could rise again in 2016 as consumers take on more debt and buy homes, interest rates are pushed higher by the Federal Reserve and more people find jobs and have enough money to seek court protection under the bankruptcy code.

Samuel J. Gerdano, executive director of the American Bankruptcy Institute, said the overall drop in filings in 2015 came despite a slight increase in Chapter 11 filings by companies in 2015. But Gerdano warned that the rate outlook Higher interest rates by the Federal Reserve Bank in the new year could reverse the decline in the number of those seeking debt relief with the help of the bankruptcy court.

“As interest rates increase the cost of borrowing, more over-indebted consumers and businesses may turn to the financial fresh start of the Bankruptcy Code in 2016,” he said.

Ahern also noted that the growing volume of student debt, which now totals more than $1 trillion, could also lead to more debt problems in the coming years, although student loans are exempt from debt protection. bankruptcy.

“In some ways, the student loan crisis resembles what we saw in the mortgage industry before the Great Recession,” said Melissa Jacoby, a law professor at the University of North Carolina at Chapel Hill and researcher. resident this year at the American Institute of Bankruptcy.

Jacoby said she expects bankruptcy filings to increase slightly this year.

But before those concerns last year, U.S. bankruptcy filings fell 10% to a total of 819,240 — the lowest number in nine years, according to data compiled by Epiq Systems, Inc.

The average per capita bankruptcy filing rate across the country fell last year to 2.63 filings per 1,000 people. But Tennessee’s rate of bankruptcy filings was more than double the national average and the highest of the 50 states last year.

In 2015, there were 5.73 deposits per 1,000 residents of Tennessee. Alabama and Georgia ranked second and third respectively for the proportion of people going bankrupt in 2015.

Ahern and Jacoby said bankruptcy filings tend to be higher in Tennessee and other states where creditors have an easier time seizing property or garnishing wages to collect unpaid debts. In Tennessee, Georgia, and Alabama, creditors generally do not need to obtain a court order or have a court hearing before asserting their property or wage claims, as creditors must. do in many other states. To avoid garnishments or wage garnishments, many consumers choose to file for bankruptcy and settle their debt through bankruptcy court.

Many of these bankruptcies are Chapter 13 filings in which debtors repay some or all of their debts under a debt reorganization plan. In other states, a higher share of those filing for bankruptcy are Chapter 7 filings in which debtors simply liquidate the assets they have before making a fresh start by emerging from bankruptcy.

Last year, more than 60% of all bankruptcy filings in Chattanooga were Chapter 13 petitions in which consumers developed court-supervised repayment plans, according to year-end reports. of the US East Tennessee Bankruptcy Court. The share of people seeking to reorganize their debts in a Chapter 13 filing, rather than liquidating their assets to pay their debts in a Chapter 7 proceeding, is twice as high in Chattanooga than in the whole country.

“Tennessee has a long tradition of strong Chapter 13 filing trends dating back to the late Judge (Ralph) Kelley in Chattanooga,” Ahern said. “So while bankruptcy rates are higher in Tennessee, a greater share of cases are Chapter 13 reorganization plans and that tends to recover more over time for creditors.”

Contact Dave Flessner at [email protected] or 757-6340

Terri S. Tomasini