Tennessee leading in bankruptcy filings
NASHVILLE (AP) — Ten-nessee had the highest rate of bankruptcy filings per household of any state last year.
A new report from the National Bankruptcy Research Center shows that one in every 59 households filed for bankruptcy in 2007. More than 38,500 Tennessee households filed for bankruptcy in 2007, according to the report.
The trend is nothing new, said William L. Norton III, a Nashville bankruptcy attorney who also teaches bankruptcy law at Vanderbilt University.
Tennessee also ranked first in household bankruptcies in 2006. But the state ranked 42nd in growth of bankruptcy filings between 2006 and 2007.
“That just means they’ve always been high, so there’s nothing to grow,” Norton said.
One of the main reasons is the high rate of homeownership here, and in the South in general, he said.
And in Tennessee lenders do not have to go to court to foreclose on a home.
A Tennessee legislator was one of the people who pushed for the passage of the Chapter 13 bankruptcy law in the 1930s. Ever since, there has been a culture of Chapter 13 bankruptcy filings among attorneys.
Norton said Tennessee attorneys’ preference for Chapter 13 filings over Chapter 7 filings could also be an issue.
Chapter 13 allows people to hold on to assets and pay creditors out of their income.
It also allows them to defer the payment of attorneys fees and filing fees.
“It’s more attractive to creditors because they get their money faster. ... It’s also more attractive to the person filing,” he said.
In other parts of the country Chapter 7 filings — which liquidate most of a person’s assets to pay creditors — are more common, and that could make people more reluctant to file for bankruptcy, Norton said.
Published in The Messenger 1.31.08