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Shelby County’s high bankruptcy rate

On Behalf of | Nov 11, 2023 | Consumer bankruptcy |

People file for bankruptcy in federal courts across the United States. Statistics show a significant number of bankruptcy filings in Tennessee, leading some to wonder why. Understanding the reasons for bankruptcy helps some make decisions that could prevent debt accumulation. However, there are situations where amassing debt and filing for bankruptcy proves impossible to avoid.

Bankruptcy in Tennessee

Shelby County in Tennessee has a substantial volume of bankruptcy filings. During a 12-month period, Shelby County experienced six personal bankruptcy filings per 1,000 residents. Of the top ten counties with the highest number of bankruptcies, Shelby County is ahead of the second county, Jefferson County, Alabama, by a wide margin.

Several factors contribute to the high number of bankruptcies, including poverty, racial biases and the ability of landlords to move forward with evictions easily. Regardless of the underlying reasons for financial distress, filing for bankruptcy may be the only way debtors can deal with their obligations.

Bankruptcy chapters

Data reveals that 80% of bankruptcy filers in Shelby County opt for Chapter 13, which is dubbed wage earner’s bankruptcy. Under Chapter 13, the debtor agrees to a three- to five-year payment plan to address their creditors. Some of the debts owed would face a discharge, meaning the debtor would become free of any repayment obligations.

Chapter 7 bankruptcy would be the other primary option for individuals seeking a solution to their excessive debts. Chapter 7 refers to liquidation bankruptcy, and those seeking such protections must pass a means test for eligibility. Chapter 7 does not involve proposing a payment plan. Instead, the trustee liquidates non-exempt assets, with the proceeds going towards the repayment of creditors.