Nation’s Highest Bankruptcy Rates Found in the South

Studies
States and Counties With the Highest Bankruptcy Rates

Personal bankruptcy filings in the U.S. last year fell to lows not seen since before the beginning of the Great Recession in 2007, according to the American Bankruptcy Institute. But while the tide of bankruptcies in 2015 ebbed nationwide, bankruptcy rates are still high in some parts of the country.

NerdWallet examined the most recent federal data to get a picture of bankruptcy filings at the state and county level. We analyzed U.S. Courts data to determine the number of personal bankruptcy filings per 100,000 residents in each state and county. The median bankruptcy rate among the 587 counties examined was 224 filings per 100,000 residents. Among the 50 states and Washington, D.C., the median bankruptcy rate was 226 filings per 100,000 residents.

Key takeaways

Struggles in the South. Six of the 10 states and eight of the 10 counties with the highest rate of personal bankruptcy filings are in the South.

Many of the areas have lower median annual incomes. Eight of the 10 states and eight of the 10 counties with the highest rates of bankruptcy filings have annual household incomes lower than the 2014 U.S. median of $53,657.

Few consumer protections. Many of the states with the highest bankruptcy rates in this analysis also offer the fewest legal protections for consumers and their assets. Alabama and Kentucky, for example, allow collectors to seize nearly everything a debtor owns, according to the National Consumer Law Center.

States with the highest bankruptcy rates

  1. Tennessee, 553 bankruptcy filings per 100,000 residents
  2. Alabama, 529 bankruptcy filings per 100,000 residents
  3. Georgia, 483 bankruptcy filings per 100,000 residents
  4. Illinois, 432 bankruptcy filings per 100,000 residents
  5. Utah, 392 bankruptcy filings per 100,000 residents
  6. Indiana, 387 bankruptcy filings per 100,000 residents
  7. Mississippi, 361 bankruptcy filings per 100,000 residents
  8. Kentucky, 345 bankruptcy filings per 100,000 residents
  9. Arkansas, 344 bankruptcy filings per 100,000 residents
  10. Ohio, 322 bankruptcy filings per 100,000 residents

Counties with the highest bankruptcy rates

  1. Shelby County, Tennessee, 1,286 filings per 100,000 residents
  2. Clayton County, Georgia, 1,096 filings per 100,000 residents
  3. Houston County, Alabama, 940 filings per 100,000 residents
  4. St. Louis,* Missouri, 891 filings per 100,000 residents
  5. Henry County, Georgia, 861 filings per 100,000 residents
  6. Newton County, Georgia, 850 filings per 100,000 residents
  7. Milwaukee County, Wisconsin, 780 filings per 100,000 residents
  8. Douglas County, Georgia, 755 filings per 100,000 residents
  9. Bradley County, Tennessee, 745 filings per 100,000 residents
  10. Montgomery County, Alabama, 738 filings per 100,000 residents
*The U.S. Census Bureau classifies St. Louis as a county.

Bankruptcy and credit

Seeking debt relief through bankruptcy means no more collections calls, wage garnishments or lawsuits. In addition, depending on the kind of bankruptcy filing, there’s no more overwhelming debt. The majority of personal bankruptcy filings are for Chapter 7, which erases most unsecured debt — such as credit-card debt and medical bills.

But filing for bankruptcy has a lasting impact on credit history. A bankruptcy claim lives on a credit report for seven to 10 years, and it can become harder to access unsecured credit or loans (not backed by collateral) until you begin building a positive credit history.

In some cases, assets that aren’t protected by state law may have to be sold to pay creditors.

People who file for bankruptcy may be able rebuild their credit over time by responsibly managing a credit card as an authorized user or with help from a co-signer. In some cases, an option might be a secured card, which is backed by a cash deposit. These are good credit cards for bad credit, but approval after a bankruptcy filing isn’t guaranteed. Ask an issuer before applying if bankruptcy is an automatic disqualification, since a rejection has a negative impact on credit score.

Read more about bankruptcy, as well as NerdWallet’s detailed methodology, in the full version of States and Counties With the Highest Bankruptcy Rates.

This post has been updated to clarify the impact of bankruptcy on a filer’s ability to later access credit.

Laura McMullen is a staff writer at NerdWallet, a personal finance website. Email: lmcmullen@nerdwallet.com. Twitter: @lauraemcmullen. Courtney Miller is a data analyst at NerdWallet. Email: courtney.miller@nerdwallet.com.