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Alabama has fourth highest bankruptcy filing rate in U.S.

The economic downturn these last few years has forced Americans to re-evaluate their spending. The struggling economy has led to the creation of tight budgets and a decrease in luxuries such as shopping and eating out. It has also lead many to consider more large-scale solutions, such as bankruptcy as a way to eliminate debt.

No one ever hopes or plans to be filing for bankruptcy. But credit card debt and other obligations can quickly pile up, and in many cases, the individual or family is unable to get out from under their mounting debt.

The American Bankruptcy Institute recently released study data showing Alabama has one of the highest per capita bankruptcy filing rates in the U.S. in 2012. While total filings were down in the state from 2011, Alabama claims the fourth highest per capita bankruptcy filing rate at 5.84 for 2012. The average filing rate per capita in the US is 3.83. The highest per capita filing rate was in another southern state, Tennessee, with a filing rate of 6.88. The total filings dropped in the US in 2012 by a total of 14 percent. There were 1.2 million nationwide filings in 2012 compared to 1.4 million the year before.

The two types of personal bankruptcy are Chapter 7 and Chapter 13. If the individual or family qualifies for Chapter 7, that type usually proves to be an appropriate option. Both types of filings put automatic stays on collection efforts, stop foreclosure and repossessions and prevent wage garnishments. However, only Chapter 7 liquidates and eliminates debt. Chapter 13 allows the filer to create a reorganization and repayment plan for the debt. While there are important differences between chapters, both options can help an individual or family struggling with debt create a fresh financial start and an opportunity to rebuild credit.

Source: Birmingham Business Journal, "Bankruptcies fall, but Alabama has high per capita filing rate," Antrenise Cole, Jan. 29, 2013

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