Bankruptcy Questions Answered

Georgia Personal Bankruptcy Filings Continue to Increase

According to a recent article regarding Georgia bankruptcy published in the Atlanta Journal Constitution, it is nothing new that Georgia has one of the highest bankruptcy rates in the nation. What is new, suggests the AJC article, is who is filing: large numbers of people who have not previously had problems with financial instability.

With unemployment exceeding 10 percent, a real estate market in shambles, and many laws in place which support creditors, Georgia has had one of the highest bankruptcy rates for years. In 2009, and even here in early 2010, the numbers of people in Georgia filing personal bankruptcy continue to increase. These increasing numbers are partially the result of the large numbers of filers who are experiencing financial instability for the first time.

Richard Thomson, a partner at the Atlanta-based bankruptcy law firm Clark & Washington, said his firm is taking on an increasing number of higher-income professionals as clients. These higher-income filers simply can’t pay for all of their assets and possessions – boats, expensive cars, etc. As a result, they are filing bankruptcy as a means to start over, and their possessions are often given up as part of the process. According to Thomson, “They’re just saying ‘Take it. It’s not worth the effort anymore. I can’t keep up with it.”

Susan Blum and I are seeing the same trends here at Ginsberg Law Offices.   While our firm has regularly handled cases for formerly high earners and individuals with substantial assets, we are seeing more and more people who start our meetings by saying "I never in a million years thought I would ever end up talking to a bankruptcy lawyer…."   In many cases, clients who had previously enjoyed a comfortable lifestyle wait until disaster is about to strike before calling our office, perhaps in the expectation that their situations will improve.  And more and more of these clients are turning to a Chapter 7 liquidation rather than a Chapter 13 reorganization.

More Chapter 7 Cases Being Filed

According to the National Bankruptcy Research Center, over half of Georgians filing between January and November 2009 filed Chapter 7 Bankruptcy. In a Chapter 7, most debts are wiped out, but so are assets that aren’t protected by exemptions – second cars or vacation homes, for example. 47 percent filed Chapter 13 Bankruptcy, which allows consumers to hold on to a house and car but requires that they repay a portion of their debts generally over a five year period. A Chapter 13 is more or less a reorganization of debt.

These percentages are new for Georgia, which traditionally has been dominated by Chapter 13 filings, as debtors were most concerned about holding onto a house and accumulated equity. Currently, many homeowners have little equity or owe more than their houses are worth, which may be one reason for the spike in Chapter 7 filings.

According to Consumer Credit Counseling Service of Greater Atlanta, one in five consumers receiving recent pre-bankruptcy counseling said avoiding foreclosure was the primary reason for seeking bankruptcy protection. Georgia’s foreclosure process is the fastest in the nation, as it occurs without court or government supervision and takes only a week. A bankruptcy filing is the only realistic option for most Georgians seeking to delay a public auction of their homes.

I (Jonathan) have been representing individuals in Chapter 7 and Chapter 13 cases for over 20 years and I can only remember two or three times when the demand for our services was so high.  The Congressional Budget Office says that the recession is over but I am not seeing any indication that this is true.

Posted in 10, Amp, Assets, Bankruptcy, Chapter 7 Bankruptcy Filings in Georgia, Filers, Foreclosure, General consumer bankruptcy info, Georgia Bankruptcy, Georgia bankruptcy rates, Law, Possessions, and, atlanta based, boats, can’t, clark, clients, exceeding, expect, experiencing, financial, firm, georgia bankruptcy filings, georgia’s, higher income, homes jack, instability, instability with, numbers, pay, percent, problems, process, protection, recent bankruptcy trends in Georgia, seeking, simply, the, unemployment, williams, – | Comments Off

Georgia Among Top Five in Bankruptcy Filings Per 1000 Residents

Filing bankruptcy reshapes America.

This chart from the EconomicCrisisBlog.com graphically illustrates what many of us in the Atlanta area already know – Georgia has one of the nation's highest rates of bankruptcy filings.

Why is this and why has it been this way for years – long before the current recession?  From my perch as an Atlanta debtor's attorney, I believe that the following factors contribute to our state's high filing rate:

• most people in Atlanta are not from Atlanta.  As such, they do not have close family nearby who can help out with a loan or with a place to stay
• the economy in Atlanta is and has been primarily a service economy, with an emphasis on communications, IT infrastructure, and transportation.  These industries tend to move through boom and bust cycles more quickly than the economy in general, making jobs in these areas less stable
• Atlanta is a young, somewhat flashy city that encourages conspicuous consumption.  As a metropolitan hub, Atlanta exploded in the 1970's meaning that most of the suburbs are 20 to 30 years old.  There really isn't much "old money" here – and the entrepreneurial class that drives much of the region's business is inherently less financially sound
• bankruptcy filings tend to breed more bankruptcy filings.  When you look at the total numbers of filings over the past 20 years, the totals add up to more than the total population of the metro Atlanta area!  Now, obviously some folks have moved elsewhere but I sense that in general, the idea of filing a bankruptcy in Atlanta is seen as a financial tool rather than a badge of personal failure
• there is a lot of information out there about filing for and recovering from bankruptcy.  Information empowers people to understand their options and to make reasoned choices.  Although bankruptcy is and should be considered a last resort, it can offer a fresh start for honest, hardworking people who are facing an otherwise unmanageable financial crisis

Can you think of other reasons why Atlanta and Georgia have such high filing rates – I'd love to hear from you.

Posted in General consumer bankruptcy info, Georgia Bankruptcy, bankruptcy northern district of georgia, economic crisis blog, georgia bankruptcy filings, rate of bankruptcy filings per state | Comments Off