Although bankruptcy filings were at a low percentage of the population last year, the signs of heavy credit card use, increasing medical bills and rising prices portend an increase next year. Interestingly, it is also true that bankruptcy filings in certain states and geographical locations were substantially higher than the national average. According to surveys by the American Bankruptcy Institute and Nerd Wallet, six of the 10 states with considerably higher numbers of filed bankruptcies are in the south, with Arkansas having the ninth highest number of new filings for 2015.
Although the median bankruptcy rate is 226 filings per 100,000 residents, in Arkansas that percentage is higher with 344 filings per 100,000. It appears that where there are more residents with annual incomes below the national average, the bankruptcy filings are higher. That statistic seems to support the idea that rising prices and lower wages are crunching a segment of the middle class severely.
The majority of filings are Chapter 7 petitions, which is the kind of bankruptcy where unsecured debt is quickly and totally wiped out. This means that harassing calls, wage garnishments and collection lawsuits are also wiped out. Thus, a person with high credit card debt and medical bills will be relieved of those bills in Chapter 7.
It is true that a Chapter 7 bankruptcy also allows for the seizure of assets and distributing the proceeds to creditors. However, that rarely happens due to ample exemptions under the law. In Arkansas, a consumer who files is allowed to choose the federal exemptions. The federal rules provide sufficient exemptions for personal belongings, clothing, furniture, furnishings, jewelry and numerous other personal property exclusions. To find out if a resident qualifies to file for this powerful debt relief remedy, it is recommended that interested consumers make an appointment to consult with an experienced consumer bankruptcy attorney.
Source: csmonitor.com, "The South has the highest bankruptcy rates in the country", Laura McMullen and Courtney Miller, Aug. 16, 2016