Your personal finances are affected by many factors, including paying for higher education, medical bills and job loss. Divorce can also put immense strain on your bank account. These factors overwhelm hundreds of thousands of Americans every year, causing them to file for bankruptcy.
Chapter 7 and Chapter 13 bankruptcy are legal processes in which people unable to pay off their debt can start fresh and begin saving for their future again. Americans from coast to coast file for bankruptcy, but some states are more prone to residents facing financial hardships and resorting to bankruptcy.
This ranking is based on the American Bankruptcy Institute's cumulative 2019 Bankruptcy Statistics of states and territories, including the District of Columbia. Of the 749,654 total Chapter 7 and Chapter 13 bankruptcy filings in the U.S. in 2019, these states had the highest rate per capita of filing.
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The First State ranks 12th when it comes to bankruptcy with 2,779 filings in 2019. This might seem to pale in comparison to California's more than 67,000 total filings in 2019 but because of this charming coastal state's smaller population, this is the equivalent of three out of every 1,000 people filing for bankruptcy. Compared to other states, Delaware has some of the highest student loan debt, with studies putting the average student loan balance at more than $34,000.
For the past few years, Ohio has had more than 36,000 people file for bankruptcy, which is actually an improvement from the almost 70,000 filings at the beginning of the decade in 2010, the year following the Great Recession. Despite this, Ohio also saw Chapter 12 farm bankruptcy filings in 2019 that tied with the previous decade high. Ohio is one of the country's top soybean producers and its rural areas are known for their stunning natural beauty.
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Though it has an unemployment rate better than the national average, Utah cracks the top 10 when it comes to bankruptcy filings per capita with more than 9,000. Perhaps it's because Utah has the third-highest average credit card debt at about $11,000 per person according to ValuePenguin, which used data from the FCC and U.S. Census Bureau. Credit card debt can catch up with anyone, causing even celebrities and athletes to declare bankruptcy.
Attempting to cash in on a booming cannabis industry, many companies set up shop growing and processing hemp in Kentucky. But even seemingly lucrative marijuana business moves can turn out to be financial mistakes, as one of the state's biggest hemp businesses already filed for Chapter 11 bankruptcy. In 2019, Kentucky saw almost 15,000 filings in total, which is almost four out of every 1,000 people.
Indiana is known for its college basketball, its iconic pie and unfortunately its high rate of bankruptcy. It saw almost 23,000 filings in 2019. Indiana has seen record employment numbers, with industries like construction and transportation growing. However, more than a thousand jobs across the state were eliminated in the leisure and hospitality industries.
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Arkansas is one of many Southern states where residents are struggling. More than 10,000 bankruptcy petitions were filed in 2019, an improvement from the more than 16,000 at the beginning of the last decade. Arkansas is the largest producer of rice, its official state food, and many Arkansas farms and agricultural businesses are facing hardship. The American Bankruptcy Institute predicts struggling small businesses across the country will be in a better position in the future after the Small Business Reorganization Act of 2019 comes into effect in 2020.
While Las Vegas attracts many high rollers, Nevada as a state has a high rate of financial hardship with almost 10,000 bankruptcy filings in 2019. Nevada has the sixth-highest uninsured rate in the country, which means that everything from a small health issue to a dangerous disease could easily derail someone's finances.
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Illinois has the fifth-worst bankruptcy rate per capita with almost 50,000 a year. Back in 2010, that number was above 80,000. Illinois' financial struggles unfortunately extend beyond the personal or corporate. Illinois cities are not allowed to file for bankruptcy, but hundreds of municipalities, small towns and cities, including Chicago, are currently teetering on the edge of financial collapse.
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Mississippi has the second-worst unemployment rate in the country at 5.7%, compared to the national average rate of 3.6%. It is also the poorest state in the nation, with 19.7% of people living below the poverty line and one of the lowest median household incomes. This might explain why it has the fourth-highest bankruptcy filings per capita in the country with more than 12,000 per year.
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Georgians struggle despite having unemployment rates hit all-time lows. There were more than 43,000 filings in 2019. According to the Atlanta Journal-Constitution, Georgia has a number of factors that contribute to this high rate, including creditor-friendly state laws, weak consumer protections and a more easy-to-navigate bankruptcy process. Georgia also has the country's third-highest rate of people without health insurance, making medical debt a more serious threat here.
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Tennessee-based chain Fred's was just one of the major corporate names to file for bankruptcy in 2019, along with national chains Forever 21, Payless Shoesource and Gymboree. Tennessee has seen the second-most bankruptcy filings per capita in the country with more than 33,000, a slight improvement from having the most in the country from 2014-16.
For three years in a row, the state of Alabama has had the highest per capita filing rate in the nation. In 2019, more than 26,000 people filed for bankruptcy, a similar number to both 2018 and 2017. While Alabamans have lots of state pride and school spirit, the state doesn't always love its residents back. Alabama has some of the fewest legal protections when it comes to indebted consumers. For example, the state allows debt collectors to seize nearly everything a debtor owns, according to the National Consumer Law Center.
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