Reply #27: Georgia leads nation in bankruptcy filings

[54anickel]

Creditor-friendly laws, not economic conditions, drive debtors to court --- especially with a home foreclosure on the horizon

http://www.ajc.com/business/content/business/stories/2006/12/29/bizbankrupt1229a.html

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Georgia's high ranking doesn't necessarily mean that the state's economic conditions are the worst in the country. It's more likely a reflection of Georgia's slate of creditor-friendly laws.

Because of those laws, when Georgians get into a tough spot, bankruptcy is often the only place to find protection. That's particularly true when a consumer has trouble paying a mortgage.

In Georgia, no court process is required before a lender can foreclose on someone's home. Once a borrower falls behind on a mortgage and a lender initiates foreclosure, a house can be sold on the courthouse steps in as few as 37 days. Only Texas and Tennessee allow foreclosures to proceed as quickly.

Filing for bankruptcy protection puts a foreclosure sale on hold.

"In this state, because foreclosure moves so quickly, the bankruptcy filing is often the only alternative a consumer has to get a little breathing space to work out their situation," Boas said.

Most people facing a foreclosure file for Chapter 13, which allows consumers to hold onto their homes and cars but requires that they repay a portion of their debts. Chapter 13 filings are more common in Georgia than Chapter 7 —- a liquidation in which most debts are wiped out, but so are all of a consumer's assets that aren't protected by exemptions.

The impact of the federal bankruptcy reforms was not as great in Georgia because the reforms targeted Chapter 7 filings, requiring consumers to meet income tests before they can file. The changes also increased the costs of filing for bankruptcy and required debt counseling for consumers.

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