Bankruptcies are on the decline in Georgia, but the Peach State continues to hang onto its position as one of the top states in the nation for bankruptcy filings.
Georgia ranked third nationally for its rate of bankruptcy filings in 2015, behind Tennessee and Alabama, according to new statistics from the American Bankruptcy Institute (ABI) and Epiq Systems.
The state's position near the top of the rankings is hardly anything new.
The Atlanta Journal-Constitution reviewed Epiq Systems' state bankruptcy statistics going back to 2009 and found that Georgia ranked either second or third-highest nationally every year.
What makes Georgia such a consistently strong performer, when it comes to filing bankruptcy cases?
Experts say a variety of factors come into play, including having plenty of highly-visible bankruptcy attorneys. But another consistent factor is Georgia's relatively creditor-friendly slate of laws. That includes fewer exemptions in Georgia to protect assets from collectors and a super-fast foreclosure process that doesn't require court approval.
"If you want to keep your property and try to work your debt out, or if you want to prevent a foreclosure and try to work a debt out, the only alternative you have, absent a creditor consenting, is a bankruptcy filing," said Jack Williams, a Georgia State University law professor who is a bankruptcy expert.
"You combine that kind of state law, that is not very debtor-friendly, with a bankruptcy bar that is very sophisticated," Williams said, "and then you have the atmospheric conditions for the use of bankruptcy and the effective use of bankruptcy."
Williams said another factor at play in Georgia is that metro Atlanta attracts a lot of entrepreneurs. "We have a lot of start-ups, but we have a lot of failed businesses," Williams said.
When a small business fails, that often drives an individual into bankruptcy, he said, to deal with the business-related debts.
Bankruptcy filings have gone down in Georgia since the high points of the mortgage meltdown, when record numbers of Georgians faced foreclosure notices and business failings were common.
In 2010, more than 77,000 bankruptcies were filed in Georgia courts and Georgia ranked second nationally for its bankruptcy rate. Last year, total filings dropped to 49,334, according to the Epiq Systems statistics. But the numbers dropped greatly in other states too, so Georgia still remains near the top of the charts.
Howard Rothbloom is a veteran Atlanta bankruptcy attorney, who started challenging predatory mortgage lenders before most people had ever heard of subprime loans.
"I tend to think that filings are down just because, of course, foreclosures are way, way down," Rothbloom said.
Rothbloom said he wonders whether filings will tick up again, when programs to help struggling homeowners are phased out.
During the economic meltdown, bankruptcy courts saw plenty of Atlantans who had once been high income: people with fancy cars and second homes whose incomes had taken an unexpected nosedive.
These days, Rothbloom said, he is seeing more people who have a history of financial difficulty.
"They are people that struggle in good economies and bad economies," he said. "I tend to be seeing more lower income and more lower socio-economic filers than we normally see when volume is higher," he said.
Is Georgia damaged by having such a high bankruptcy rate?
"It's not a negative for our state, in and of itself, but I like to think it is an opportunity for self assessment from a state perspective," Williams said.
Today's stronger economic times may be a good time to examine these issues, he said.
"We may conclude that nothing needs to change," Williams said. "But it's about time for another serious assessment of our mortgage laws, our foreclosure laws and our debtor-creditor laws, because the world has changed dramatically with the technologies we have. We can ask some of those fundamental questions and revisit those issues."
The average nationwide per capita bankruptcy filing rate for 2015 decreased to 2.63 (total filings per 1,000 per population) from the 2.93 rate during 2014, according to the American Bankruptcy Institute and Epic Systems. States with the highest per capita filing rate in 2015 were:
- Tennessee (5.73)
- Alabama (5.36)
- Georgia (5.02)
- Illinois (4.34)
- Utah (4.28)
Source: Epiq Systems, American Bankruptcy Institute