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Tennessee tops bankruptcy filings for second consecutive year

For the second year in a row, Tennessee tops the national list for bankruptcy filings per capita per state. This does not mean that the state is a forlorn hotbed of insolvency. It may actually means the opposite: Tennesseans know what it takes to manage and repay debts in a responsible manner.

According to the Bankruptcy Institute of America, the state ranked number 1 again with 6.59 bankruptcy filings for every 1,000 residents. The per capita filing was double the national average of 3.3 filings.

Many of the bankruptcies filed in Tennessee are Chapter 13 filings. In this type of filing, debtors offer proposals that will help them manage and pay off their loans and debts in a way that keeps them solvent while responsibly meeting their obligations. Their plans typically include changes in payment amounts and payment schedules that are within their economic means. Interest rates can also be adjusted. Chapter 7 filings, on the other hand, usually require lump-sum payments.

Last year's Chapter 13 filings made up 56 percent of all bankruptcy filings in the state. Only three states - South Carolina, North Carolina and Louisiana - had higher percentages. The state's bankruptcy trustee estimates that he sends out $185 million annually to creditors because Tennessee residents use bankruptcy proceedings in a responsible manner. In many other states, people would not even bother filing for bankruptcy at all, he says.

To reduce debt, sometimes Tennessee residents have to tighten their belts. In some of these situations, filing for bankruptcy can help. A bankruptcy filing can give a Tennessee resident a chance to repay his or her debts while leaving enough money in the household budget so a resident can still live without being impoverished. This type of arrangement can help a resident get back on his or her feet responsibly, effectively, efficiently and without sacrificing self-respect.

Source: Tennessean, "TN filers tend to work to repay, manage debt," Jamie McGee, Jan. 12, 2014

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