Report: Tennessee leads nation in bankruptcy filings

Most people in Nashville do their best to manage their money responsibly and stay in good financial standing. However, uncontrollable events can cause many people to fall behind and struggle with unsecured or secured debts. Unfortunately, data indicates that people in Tennessee may be at a greater risk of experiencing these financial challenges than people elsewhere. According to a recent report, Tennessee has the highest rate of bankruptcy filings in the nation.

High bankruptcy rates

The Memphis Business Journal reports that, on average, 5.17 out of 1,000 people in Tennessee file for bankruptcy. This is more than twice the national rate of 2.93 bankruptcy filings per 1,000 people. It is also significantly more than the rate reported in the state with the next greatest number of bankruptcies. In Alabama, just 4.83 out of 1,000 people file for bankruptcy.

In certain parts of Tennessee, bankruptcy filing rates have actually decreased in recent years. The Chattanooga Times Free Press reports that Chattanooga bankruptcy filings fell 10 percent from 2013 to 2014. From 2009 to 2014, filings dropped 30 percent in the same city. In some areas, filing rates could continue dropping this year, due to lower interest rates and a decrease in home foreclosures.

Still, these positive changes may not come soon enough for many state residents. If past data is any indicator, substantial debt is likely to affect a relatively large number of people in Tennessee this year. In some cases, bankruptcy may offer the most favorable solution.

Debt relief options

Consumers who file bankruptcy can typically choose between Chapter 7 and Chapter 13 bankruptcy. During Chapter 7 bankruptcy, a debtor's assets are liquidated to pay down his or her debts. Once this process is finished, remaining debts may be eligible for discharge. In contrast, during Chapter 13 bankruptcy, debtors enter into approved repayment plans. After these plans are complete, qualifying remaining debts may be discharged.

Chapter 7 bankruptcy allows debtors to pay off or discharge various forms of unsecured debt. This includes medical debt, credit card debt, personal loans, some business debts and certain tax debt. However, some other debts, including student loan debt, are not eligible for discharge. When debtors file Chapter 7, they can exempt certain property from liquidation, but they forfeit all non-exempt property.

Chapter 13 bankruptcy allows debtors to maintain their personal property while paying down their debt. The Chapter 13 repayment plan typically lasts three to five years and prioritizes certain secured debts, such as mortgages and vehicle loans. Once these are repaid, the plan may address other priority debts, such as overdue child and spousal support or certain tax debt. Unsecured priority debt and non-priority debt remaining at the end of the plan may be eligible for discharge.

Exploring debt relief options

Tennessee residents who are struggling with growing debt may benefit from consulting with a bankruptcy lawyer about different means of debt relief. A bankruptcy attorney may be able to advise a person on the bankruptcy chapters and the options that may be most favorable.