Bankruptcy Statistics:  How Many People File Bankruptcy Each Year?

How many people file bankruptcy in the United States each year?  Statistics compiled by the Bankruptcy Institute show that in the first quarter of the year 2012, 355,000 people have filed bankruptcy, which is down about 12 percent from the same period of time in 2011.  For the year 2011, 1.37 million people filed bankurptcy, which was less than the 1.55 million people who filed bankruptcy in 2010.

What percentage of the population files bankruptcy?  A general rule of thumb is that less than 10 people out of every 1000 in the USA file bankruptcy every year.  In some states, this rate can vary significantly.  For example, in recent years when the economy in Nevada was particularly bad, the rate was 11 out of 1000 residents.  In other states, the rate is 7 out of every 1000 file bankruptcy and in other states the rate is under 2 per 1000.

Which states lead the nation in bankruptcy filings?   The ten states with the most bankruptcy filings can change year to year.  For example, back in 2005, the following states had the most and fewest bankruptcies.
2005: States With Highest
Bankruptcy Filing Rate

Missouri
Indiana
Nevada
Utah
Oklahoma
Oregon
Idaho
Kentucky
Ohio
West Virginia
2005: States With Lowest
Bankruptcy Filing Rate

New York
Connecticut
New Hampshire
Vermont
Delaware
Massachusetts
North Carolina
Alaska
Texas
South Carolina
Bankruptcy experts have tried to find out why some states, such as Utah, Indiana and Nevada, have bankruptcy filing rates that are much higher than the national average year after year while other states, such as New York, South Carolina, Texas, and Alaska have much lower bankruptcy filing rates year after year. There has not been a clear connection found.  Reasons for the difference in filings could be unemployment and income since states with a high median income and low unemployment rate tend to have lower filings while states with high unemployment and a low median wage tend to have high bankruptcy filing rates.

A significant percentage of bankruptcies are caused by medical debt, so one might think that states with the highest filing rates would have the highest percentage of uninsured.  This is not so.  States with low bankruptcy filing rates, such as Texas, South Carolina and Alaska have significantly higher percentages of uninsured than do the states with the highest bankruptcy filing rate.

One might wonder if Indiana's and Nevada's high bankruptcy rates might be due in part to the exceptional number of gambling venues and casinos available in or near these states.  Researchers cannot pinpoint how many bankruptcies are due to gambling since most gamblers use credit card advances to fund their habit and this is not listed in their bankruptcy papers.  But even if this were true, it doesn't help explain why Utah (a Mormon state with high median incomes and little gambling) is one of the states with the highest bankruptcy filing rates.

State bankruptcy laws:  There does seem to be a correlation between bankruptcy filing rates and state bankruptcy laws governing how much property a debtor can keep in bankruptcy. For example, Texas has a much lower than average bankruptcy filing rate and Texas state law is very generous towards debtors, allowing Texans to shield a big chunk of assets from creditor seizure or levy.  For example, wage garnishments are prohibited in Texas for all debts except child support and it is virtually impossible for a creditor to go after a Texan's home.  Therefore, few Texans would have the need to file bankruptcy.  North Carolina has generous laws protecting debtors as well. 

Conversely, some states such as Delaware, are very creditor friendly.  A debtor would not have much of an incentive to file bankruptcy if he resided in Delaware as he would have to turn over much of his property to the bankruptcy court, so he has much more of an incentive not to file.  But then again, this does not explain why Utah, a state that does not have exceptional bankruptcy exemptions, also has a high bankruptcy rate.
Debt  >  Bankruptcy >  Bankruptcy Statistics
Compare the table above with the statistics for the year 2011:
2011: States With Highest
Bankruptcy Filing Rate

Nevada
Georgia
Tennessee
Utah
Alabama
California
Colorado
Indiana
Michigan
Illinois
2011: States With Lowest
Bankruptcy Filing Rate

District of Columbia
Alaska
South Carolina
Vermont
North Dakota
Texas
South Dakota
Montana
North Carolina
New York
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