Last week’s Atlanta Business Chronicle has an article by John Manasso about the rise in bankruptcy filings and foreclosures. See Bankruptcy Filings Bullet Past Other States (subscription req’d).
The Northern District of Georgia is second only to the Eastern District of Michigan (which includes impoverished Detroit) in the number of Bankruptcy filings — 31,435 in 2007. The article notes that Georgia has higher than average income, but lower than average credit scores, and Judge Bihary sees this as a factor –
"People need to be more realistic about what they can really afford," she said. "People who have bought homes – much more home than they can possibly afford – are well-advised to find less expensive housing that would meet their needs." As a society we need to do everything we can to increase financial literacy. The need to understand the range of products, mortgage and credit cards, is so pressing."
Judge Bihary also places some blame on lenders –
"In the current environment, we’re obviously dealing with results of lax lending standards."
Other notes from the article:
- In 2000, the last recession, there were 31,906 cases (which the author confusingly calls "claims") filed, and the number jumped by 6,219 in 2001. Judge Bihary believes we may see a similar increase in 2008.
- One reason for the large number of cases is the relative ease of foreclosure under Georgia law.
- In 2007, the three Chapter 13 Trustees processed $180 million in payments. However, this number is probably skewed because of the unusual number of filings before the BAPCPA went into effect in October 2005.
Thanks to Jonathan Ginsberg for alerting me to this article.