Tennessee Tops List in Bankruptcy Filings, Report Finds

Although most people in Tennessee try to manage their money in a responsible manner, many households are only one uncontrollable event (e.g. unexpected medical bill) away from falling behind on their bills. According to the most recent data, Tennessee residents are at a greater risk of experiencing challenging financial circumstances than persons who live elsewhere. A recent report found that the rate of bankruptcy filings in Tennessee is the highest in the nation.

Home foreclosures drive trend

According to the Memphis Business Journal, an average of 5.17 people out of 1,000 file for bankruptcy in Tennessee. This is more than double the national rate of 2.39 bankruptcy filings per 1,000 people. To add insult to injury, the rate in Tennessee far outpaced the state with the next highest per capita filing rate, Alabama, which only had 4.83 filings per 1,000 residents.

Financial experts say that the threat of losing their homes in a foreclosure sale is the biggest reason why Tennesseans are compelled to file bankruptcy. The data also indicated that Tennessee residents are more likely to file Chapter 13 bankruptcy, than their national counterparts. This type of bankruptcy allows many residents to save their homes as they pay off their mortgage arrearages under a payment plan. In come counties in Tennessee, the Chapter 13 filing rate is as high as 56 percent, compared to the 31 percent nationwide rate.

Saving your home with bankruptcy

If you are one of the many Tennessee households struggling to keep up with their mortgages, you may wonder how bankruptcy can help. Depending on your circumstances, either type of individual bankruptcy type can help you. However, one type may be more helpful than another.

If you are struggling with your mortgage because of unsecured debts like medical bills and credit cards, Chapter 7 may be able to help you. This type of bankruptcy can quickly discharge most unsecured debt, freeing up more income to be devoted towards paying your mortgage.

However, if you are behind on your mortgage and need assistance becoming current, Chapter 13 bankruptcy is often a better choice. As alluded to earlier, your mortgage arrearages are consolidated into a repayment plan. Under the plan, you make a payment each month toward your back payments over three to five years. Since the payments are stretched out over this period, they are kept affordable. As long as you keep up with your payments, your lender may not foreclose. Once you have finished Chapter 13, you are caught up with your mortgage and are free of most other types of debt.

Which option is right for you?

Choosing the right type of bankruptcy can mean the difference between success and failure. Because of this, it is vital to have the counsel of an experienced bankruptcy attorney before filing. An attorney can listen to your circumstances, outline the options available to you and recommend the best way to get you out of your financial fix.