Bankruptcy is a widespread problem in the United States, and statistics show that the situation continues to worsen every year. While large consumer debts are a common cause of bankruptcy, other important factors such as divorce, job loss, and medical expenses not covered by insurance plans can also lead to claims. It is interesting to note that citizens of Alaska, where there are the lowest rates of bankruptcy filings per year, have the second highest average income level in the United States, while Tennessee, which has the highest number of bankruptcy filers, is ranked last on the list of per capita income, ranking 45th out of 50 states. In fact, most states with the lowest income levels have much higher bankruptcy filing rates than states with higher average incomes.
The COVID-19 pandemic provided an unexpected financial boost for many people in the U. S., and after years of encouraging downward trends, this could mean that bankruptcies in the U. S. will once again be in the spotlight.
If bankruptcies increase again, most of it will likely come from Chapter 7 liquidation, which is the most common form for both commercial and non-commercial bankruptcies. Chapter 7 involves the sale of certain properties or assets to generate cash to pay creditors. Chapter 13 bankruptcy, which involves the creation of debt repayment plans, is the next most common form for non-commercial debts, while Chapter 11 reorganization is the most used by larger companies. Bankruptcy filings are unevenly distributed across geography.
Many of the places that currently have the most problems with debt are in parts of the country with the most economic difficulties. Southern states represent six of the 10 states with the most bankruptcies, and they are joined at the top of the list by several Rust Belt locations such as Indiana and Ohio.The most effective way to combat bankruptcy would be to focus on resolving marital conflicts, reforming the health insurance industry and combating high unemployment rates. With this in mind, it is important to understand which state has the highest rate of bankruptcies per capita.