Personal Bankruptcy Filings By State

By Jessica Dillinger on April 25 2017 in Economics







Tennessee has the highest personal bankruptcy rate

Personal bankruptcy in the United States is a more frequent occurrence than many people realize. Over the past century, personal bankruptcy rates in the United States have increased dramatically. From 1900 to 1950, bankruptcy filings were essential rarities. Since 1960, however, a variety of reasons have contributed to bankruptcy rates consistently increasing in the United States. Over the past 25 years, this increase has become dramatic. An all-time high was reached in 2005 as more bankruptcy cases were filed than ever before. In that year, one of every 55 U.S. households went bankrupt. It is important to realize, however, that the definition and processes for personal bankruptcy filings are not the same in every state. This is why some states have a great number of bankruptcy filings each year, while others have very few.

Who Is Most Vulnerable to Becoming Bankrupt?

The typical American who files for bankruptcy is a high school graduate heading a Lower-Middle Class household. Many of these bankruptcy filers have landed themselves in poor financial situations due to money mismanagement and heavy credit use. The average age of people filing for bankruptcy in the U.S. is 38. 44 % of bankruptcy cases are filed by couples, 30 % by women filing alone, and 26 % by men filing alone.

Leading Causes of Personal Bankruptcy

While heavy consumer debt is a common cause of bankruptcy, other significant factors commonly leading to filings are major life changing events, such as getting divorced, being fired from a job, the death of a family member, or incurring a medical expenses not covered by insurance plans, as these all significantly reduce personal financial security and leverage. In fact, fewer than 9 % of the people filing for bankruptcy have not experienced a medical problem, a divorce, or loss of employment.

Regional Differences

The lowest statewide rates of bankruptcy filings in the United States are registered by Alaska and North Dakota, with relatively low rates of 56 and 94 cases per 100,000 people a year, respectively. The highest bankruptcy filing rates per 100,000 people annually are found in Tennessee (610) and Georgia (524). Most U.S. states lie between the extremes, with rates ranging between 300 and 400 bankruptcy filing cases per 100,000 people per year.

An Erratic Statistic

Year to year, due to regional changes in the economic and financial environments, bankruptcy rates in a state may change radically. For example, in 2011 the states with the high bankruptcy rates were California, Florida, Georgia, Illinois, and Ohio. In 2014, only Illinois and Georgia stayed in the top five. During the same time, California dropped considerably to its current place towards the middle of the list. Ohio is now number 13 and Florida a little further down at number 16. Accordingly, it is difficult to predict with certainty which states will have leading positions in the next year or two.

Correlation Between Bankruptcy Rates and Personal Incomes

It is interesting to note that Alaskan citizens, where the lowest rates of bankruptcy filings per year are seen, have the second highest average income level in the United States, while Tennessee, which has the most bankruptcy filers, falls towards bottom of the per capita income list, ranking 45th out of 50 states. In fact, most of the states with the lowest income levels have much higher bankruptcy filing rates than do states with higher average incomes.

Can We Turn Back the Tide on Bankruptcy in the United States?

Bankruptcy is a widespread problem in United States and, as the statistics show, the situation continues to worsen every year. Since bankruptcy would appear to depend more on personal causes than on external economic factors, fighting bankruptcy might be most effectively done by focusing on resolving marital conflicts, reforming the medical insurance industry, and combatting high rates of unemployment.

Personal Bankruptcy Filings By State