Where People File Chapter 13

Between states, there is a big disparity in the rate at which people file bankruptcy. Over the past four years, Nevada has had the highest bankruptcy filing with an a yearly average of 9.32 persons per 1,000 population file bankruptcy. At the other extreme has been Alaska with just 1.39 persons per 1,000 filing bankruptcy. As points of comparison, consider that the national filing rate over 2008 - 2011 was 3.54 per 1,000 population and that the national filing rate over the last twelve months has been 4.26 per 1,000 population.

I wondered how the filing rates would break down if we looked at just chapter 7 and chapter 13 separately. The result is the chart to the right.

For the top 10 states in each category, the chart shows annual filings per 1,000 population. To minimize the effect of temporary local conditions, the results are taken from the years 2008 - 2011 and then calculated as an average annual filing rate.

There are clearly some states that just have experienced high bankruptcy filing rates overall such as Nevada, Indiana, and Illinois. These states appear in the top 10 for both chapter 7 and chapter 13. Other states are chapter 7 states--some of which have not been historically considered to be states with high bankruptcy rates. When chapter 7 alone is considered, some states stand out. Michigan, for example, has the second highest chapter 7 rate but only ranks 21st in chapter 13 rates. Colorado has the fourth-highest chapter 7 but only the 29th-highest chapter 13 rate. Arizona ranks 6th for in chapter 7 rates but only 30th for chapter 13 rates.

At the other end of the spectrum are states where people file chapter 13 at much higher rates. Louisiana presents the most extreme case, ranking 4th in chapter 13 rates but only 46th in chapter 7 rates. It will surprise bankruptcy specialists not at all to learn that other states that tip strongly toward chapter 13 are primarily in the South. Alabama has the second-highest chapter 13 rate but only the 29th-highest chapter 7 rate. Mississippi ranks seventh for chapter 7 rates and 34th for chapter 13. Even in places that do not have particularly high overall bankruptcy rates, there can be a chapter 13 culture. For example, South Carolina ranks 24th in chapter 13 rate but dead last in chapter 7 rate. Texas has the 22nd highest chapter 13 rate but is 50th for chapter 13s.

A different comparison would be to look at the states where the chapter 13 rate per 1,000 population is higher than the chapter 7 rate. Only five states fit that description: Alabama, Louisiana, Tennessee, South Carolina, and Texas.

Why particular states or regions tip more toward chapter 7 or chapter 13 would require more space and time than I have for this blog post. In any event, I am not sure that I know the complete answer. What I have been thinking a lot about is that we need to unpack the idea that there is one bankruptcy system in the United States. Given the numerical variation it cannot possibly be the case that differences in individual circumstances explain the differences in chapter 13 rates. Are people's life circumstances that different between Tennessee and Iowa such that Tennesseans should be sixteen times more likely to file chapter 13? People are experiencing U.S. bankruptcy system in very different ways depending on where they are located.