States with the Highest Rates of Consumer Bankruptcy

Why do some states have a higher rate of consumer bankruptcy than others? According to a recent post from Credit.com, personal bankruptcy affects different states to varying degrees. Illinois, as it turns out, has the fourth-highest rate of consumer bankruptcy in the country. To better understand why more Illinoisans are filing for bankruptcy than residents of other states, we should take a closer look at why debtors decide to file for Chapter 7 or Chapter 13 bankruptcy in the first place.
Reasons for Filing for Bankruptcy
Bankruptcy can be one of the most practical and successful ways to help a consumer deal with unexpected debt burdens and insurmountable financial hardships. There are many reasons that individuals file for bankruptcy, including but not limited to:
  • Loss of a job;
  • Unexpected medical expenses;
  • Growing credit card debt; and
  • Inability to make mortgage payments.
If you are getting yourself into more debt and are unable to pay down balances, it may be time to speak to an experienced Oak Park bankruptcy lawyer about your situation. The sooner you seek legal help, the better. If you begin dipping into retirement savings to pay off debts, you can find yourself in even more financial distress years later.
Last year more than 898,000 non-business bankruptcy filings—meaning personal or consumer bankruptcy filings—were reported in the U.S. Those numbers come from data supplied by the Administrative Office of the U.S. Courts and the U.S. Census Bureau. If we put the number of total filings in another form, it shows that our country has a bankruptcy rate of 2.8 per 1,000 persons. Yet these numbers are not divided evenly among the states. Certain states have higher bankruptcy rates than others. The top ten include:
  • Tennessee (5.89 per 1,000);
  • Alabama (5.13 per 1,000);
  • Georgia (5.13 per 1,000);
  • Illinois (4.68 per 1,000);
  • Utah (4.59 per 1,000);
  • Indiana (4.36 per 1,000);
  • Nevada (3.79 per 1,000);
  • Kentucky (3.78 per 1,000);
  • Arkansas (3.71 per 1,000); and
  • Mississippi (3.62 per 1,000).
As you can see, Illinois has a rate of personal bankruptcy that is nearly two times the national average. Why do some states have higher numbers than others?
Reasons for More Bankruptcy Filings in Particular States
According to an article in the Deseret News, many factors are involved in a state’s rate of consumer bankruptcy, including but not limited to:
  • Demographics of the state’s residents;
  • State law; and
  • State bankruptcy court norms.
A study that appeared in the Journal of Law and Economics suggested that wage garnishment laws, for instance, play a significant role in a state’s rate of personal bankruptcy. If a person’s wages are being garnished and they feel that they do not have enough money left at the end of the pay period, bankruptcy may be a logical option. That can change depending on how a state permits wage garnishment. In Illinois, a specific amount of a debtor’s wages are exempt from garnishment. Assuming that you make more than the exempt amount, however, your wages can be reduced by either 15% of your gross income or the amount of your net pay that exceeds the exempted amount.
Garnishment and exempt wages in Illinois depend on your pay schedule, and the numbers are as follows:
  • $371.25 per week;
  • $742.50 every other week;
  • $804.37 twice per month; or
  • $1608.75 per month.
While garnishment laws may be one factor in Illinois’s rate of consumer bankruptcy, other issues are also at play. If you have questions or concerns about filing for personal bankruptcy, you should discuss your situation with an experienced Oak Park bankruptcy attorney as soon as possible. Contact the Emerson Law Firm to learn more about how we can assist you.
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