Why Bankruptcy Is High In Memphis
August 4, 1997
A University of Michigan study found that as many as 15 percent of Americans are prime candidates for bankruptcy. Curiously, residents of cities in the South are particularly vulnerable -- with filings in some of them more than twice the national average.
But the bankruptcy rate in Memphis, Tenn., is almost four times the national average.
- In 1997 a member of one household in every 23 in Memphis will declare bankruptcy.
- Nationwide, personal bankruptcies since 1994 have risen 44 percent, to 1.1 million annually -- while filings in the Memphis metropolitan area, which had a good-sized head start, rose 32 percent.
- The average Memphis resident owes $10,137 in non-mortgage debt -- 18 percent more than the typical American.
Experts report that while most financially strapped Americans liquidate their possessions and wipe out their debts using Chapter 7 of the bankruptcy code, Memphians prefer to keep their property and make regular payments over five years under the terms of Chapter 13.
What are the reasons for Memphis's dubious distinction?
- One is Tennessee's debt collection law, which makes it easy for creditors to garnish borrowers' paychecks.
- Studies show that people are often pushed to bankruptcy through job-loss, illness or divorce -- and the divorce rate in Memphis is about 10 percent above the national average.
- Some analysts note that Memphis has a culture of bankruptcy -- the city, itself, having gone that road in 1879.
Source: Kim Clark, "Why So Many Americans are Going Bankrupt," Fortune, August 4, 1997.
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