While bankruptcy certainly reflects a hardship on the part of an individual or business, it is important to remember that filing is a means of structuring a repayment of debts.
Financial hardship, in other words, does not necessarily mean that those filing for bankruptcy are simply walking away from the debts that they have accrued.
According to the Chattanooga Times Free Press, residents of Tennessee, who are among the national leaders in bankruptcy filings, lead the country in a less reported statistic: Debt repayment.
When someone files Chapter 13 bankruptcy they agree to repay their debts during a court-approved timetable that lasts several years. Currently, Tennessee has 63,000 Chapter 13 cases still active.
People involved in these cases have paid back $558 million to creditors according to the Office of the U.S. Trustee, which oversees the U.S. Bankruptcy Court.
This marks the most money repaid in Chapter 13 agreements of any state in the nation.
Texas came in second on the list, with $528 million paid, and Georgia has paid the third most, at $412 million. Ohio and Michigan round out the top five, having paid back $385 million and $358 million respectively.
A high percentage of bankruptcy filings in Tennessee were Chapter 13 filings, as opposed to Chapter 7 filings, according to the Chattanooga Times Free Press.
Chapter 13 bankruptcy calls for a restructuring of repayment of secured debt—debt that has physical collateral associated with it, like homes and automobiles.
In Tennessee bankruptcy cases, 56 percent of those who filed in 2008—about 47,000 people—chose the restructured repayment plan offered by filing for Chapter 13 bankruptcy.
By way of comparison, in the state of California, only 19 percent of the 125,000 people filing for bankruptcy in 2008 chose Chapter 13. Californians have repaid about $212 million in fiscal year 2008.
While there are differences between state laws that can affect the nature of bankruptcy filings, one Tennessee attorney offered his own theory. Chattanooga bankruptcy attorney Kenneth Rannick told the Times Free Press that when it comes to bankruptcy filings people want to take control and repay their debt.
This sense of responsibility led one Tennessee resident to file for Chapter 13 bankruptcy instead of Chapter 7, after a long fight to avoid bankruptcy altogether.
Angela Flanagan faced large credit card debts, and hoped to avoid bankruptcy by going to credit counseling and consulting family members. Then she learned that Chapter 13 bankruptcy allowed her to keep her house while paying back debts under a special agreement.
“I didn't want to turn 40 someday and know that I couldn't pay anyone back,” she told the Times Free Press.