Rates of Bankruptcy Filings in California

January 16, 2014  |   Posted by :   |   Blog   |   0 Comment»

market-crash-photo1How do the rates of California bankruptcy filings compare with those of the rest of the nation? The courts release statistics every year about how many people have filed bankruptcy in different states accross the nation. The statistics are taken from July to June. So the last time statistics were published in June 2013. What do these statistics say about the rate of bankruptcy filings in California?

California Bankruptcy Per Capita

First, I have to start with a disclaimer. As I calculated the rate of per capita filers in the state, I ignored the fact that many petitions are filed jointly, meaning the number of people who filed may be, theoretically speaking, twice the number represented in the study. For reasons of comparing California to other states, however, the error in per capita filings are negligible because other states offer joint filings as well.

The United States has a per capita rate of filing of about 0.035%, meaning 3.5 people in 1,000 filed bankruptcy from the months of July 2012 to June 2013. This may seem like a lot, but this number has fallen off significantly in the past few years. California, while it is the largest source of filings, with more than 161,000 people filing in that 12-month period, it also has the largest population of any state (at almost 37 million people). This means that the percentage of filers is 0.04%, or 4 in a thousand people.

There were 12 states that had larger a larger percentage of bankruptcy filers per capita than California: Arkansas, Kentucky, Mississippi, Missouri, Colorado, Illinois, Indiana, Utah, Alabama, Nevada, Georgia, and finally, Tennessee. The rate of filing varied widely. Alaska was the state with the lowest rate of filing, with only 1 in a thousand filing for bankruptcy, while Tennessee had the largest rate of filing at 7 in a thousand filing.

What causes the rate of filing to fluctuate from state to state?

Since California had the 13th highest rate of filing, can we infer that it had the 13th worse economy in that 12-month period. The numbers cannot be read with that amount of clarity. First, the favorability of the bankruptcy law may play a part in the filing rate. While the bankruptcy law is Federal, each state can determine what “exemptions” it allows its debtors to use when filing bankruptcy. In California you can keep a lot more assets than you can in other states because of California’s rules about exemptions. This may make it more appealing to file bankruptcy in California than in a state that allows fewer exemptions and allows debtors seeking bankruptcy protection fewer assets when the bankruptcy is completed.

However, economy does probably play some role in the rates of filing. It is interesting to note that the filing rate is less than 2 people per thousand in Alaska, North and South Dakota, and Texas. All four of these states have close ties to the oil industry. This information may suggest that if your state provides oil, even in the economic climate of late, it may provide a stabilizing influence on the economy of that state and result in a lower rate of bankruptcy filing.

To learn more about California Bankruptcy Attorneys, click here.

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