Bankruptcy remains common in Tennessee despite national decrease

On behalf of William Bible at Law Office of W. Thomas Bible, Jr.

Many people are pleased when they hear that the number of individuals filing for bankruptcy each year has been declining nationwide. According to a law professor who reviewed data from the National Bankruptcy Research Center, nationwide bankruptcy filings for individuals dropped by 12 percent in 2011 from the previous year. In 2011, there were 5,800 bankruptcy filings per million individuals. This means that one out of every 175 people filed for bankruptcy. In 2010, one out of every 150 people filed bankruptcy. This data shows the first year-to-year decrease in bankruptcy filings since 2006.

Chapter 7 bankruptcy filings declined by 17 percent for the latter half of 2011, compared to the number of filings during the same period in 2010. On the other hand, Chapter 13 bankruptcy filings declined by 25 percent compared to the same period in 2010.

Tennessee still retains high rate of bankruptcy filings

Despite the trend towards fewer bankruptcies nationwide, Tennessee still has one of the highest bankruptcy rates among all of the states. In Tennessee, there were 9,500 to 10,000 bankruptcy filings per million adults in 2011, well above the national average.

The research includes an analysis of bankruptcy filings in the metropolitan areas with a population of 250,000 or more. Shelby County of Tennessee, which includes Memphis, had the nation’s highest rate of bankruptcy filings in 2011. A family economics specialist at the University of Tennessee believes that cities like Memphis have such a high rate of bankruptcy filings because when one person files for bankruptcy, others nearby follow suit.

Chapter 7 and Chapter 13 bankruptcy

The two types of bankruptcy for individuals are Chapter 7 and Chapter 13. Chapter 7 bankruptcy results in the immediate discharge of most types of a filer’s debt. Although many people believe that filing Chapter 7 bankruptcy will require them to liquidate their property to pay creditors, the truth is that most people don’t have to surrender any of their property; state or federal exemptions can often be used to protect all of an individual’s property.

Chapter 13 is called reorganization bankruptcy. In a Chapter 13 bankruptcy, the bankruptcy court approves a repayment plan that requires a filer to make monthly payments over a period of three to five years. After the filer completes the plan, most types of debt that remain will be discharged by the bankruptcy court. Many of those pursuing Chapter 13 bankruptcy are wage-earning homeowners who are trying to save their houses. Filing for Chapter 13 bankruptcy can stop foreclosures in many cases.

Both Chapter 7 and Chapter 13 bankruptcy can be used by individuals to obtain a fresh start financially by eliminating most types of debt. Anyone who is struggling with financial hardships should consult with a local bankruptcy attorney to discuss debt relief options.

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