The United States has some of the highest debt rates in the world. The country is estimated to be in debt of $30 trillion in 2022. It was more than double the country’s debt ten years ago. The federal government holds the majority of this debt, but a significant portion is also held by state and local governments, businesses, and individuals. But individuals and companies are the most highly affected by it.
It’s estimated that the average American has a debt of $6,270. It affects the majority of the population. One way that Americans escape debt is by filing bankruptcy.
What is Bankruptcy?
Bankruptcy tends to have a negative look on people, but it’s one of the best things that you can do to escape debt. It’s a legal process that allows you to discharge all or some of your debts. It means that you don’t have to pay them back. There are two types of bankruptcy: Chapter 7 and Chapter 13.
Chapter 7 is the most common type of bankruptcy. It’s also known as liquidation bankruptcy. This is where you sell off your assets to pay back your creditors. Anything that’s left over is discharged. Lawyers specializing in chapter 7 usually know business law, as it’s the type of bankruptcy businesses use.
Chapter 13 is known as a reorganization bankruptcy. It’s a type of bankruptcy where you make a payment plan to repay your debts. Chapter 13 bankruptcy is common for consumers who have a regular income but can’t pay their debts. A chapter 13 bankruptcy lawyer specializes in consumer law. Consumer law is the area of law that deals with the rights of consumers, mainly credit cards and cash purchases.
There is also the rare chapter 9 bankruptcy. This is for municipalities, such as cities and towns. This type of bankruptcy is very complex. Multiple attorneys and government officials spearhead this kind of bankruptcy, affecting the entire state.
Various states have different bankruptcy states. This article will discuss the states with the highest bankruptcy rates, starting with Mississippi.
Mississippi has one of the highest debts per consumer in the country. It’s estimated that the average debt of consumers in this state is around $60,000. It also has one of the lowest FICO scores, which is 681. This means that many residents in Mississippi are struggling to make ends meet.
The state also ranks high in terms of unemployment. The unemployment rate in Mississippi is 5%, higher than the national average of 4%.
All of these factors contribute to the high bankruptcy rate in Mississippi. It’s estimated that the bankruptcy rate in Mississippi is 7.1%, which is higher than the national average of 6%. However, it has also recovered throughout the years, with a 41% decrease in bankruptcy filings. It is one of the states that is known to be fast recovering from its financial instability.
Alabama is another state with a high bankruptcy rate. The average consumer debt in Alabama is $72,000. This is higher than Mississippi, but the state has a higher FICO score of 691.
The unemployment rate in Alabama is also higher than the national average at 5.4%. However, it’s been on a decline in recent years.
Indiana is well-known for its manufacturing industry. However, the state has been struggling in recent years. The average consumer debt in Indiana is $72,000, one of the highest in the country. However, the state is known to have a decent FICO score of 712.
Indiana is a recovering state, however. The unemployment rate has been declining in recent years and is now at 3.9%. This is lower than the national average. This means that more and more people can pay their high debts. Furthermore, this debt repayment means that the state’s economy is fast improving.
Lastly, we have a state that recently filed a chapter 9 bankruptcy. This is Detroit, Michigan. The average consumer debt in Detroit is $78,000. The FICO score in Detroit is the lowest in the country, reaching a new low of 608. If you didn’t know, the average FICO score in the country is 699.
Detroit has experienced a lot of financial problems in recent years. The unemployment rate is high, at 8.4%. This is due to the declining manufacturing industry in the state. However, Detroit is slowly recovering. The bankruptcy filing has allowed the city to restructure its debt and get back on track.
The states with the highest bankruptcy rates are Mississippi, Alabama, Indiana, and Detroit. These states have high consumer debt levels, high unemployment rates, and low FICO scores. However, these states are slowly recovering. Slowly but surely, the people living in these states will recover and live better lives.