Financial Struggles are a serious issue in Alabama. In 2019, Alabama had the highest per capita bankruptcy filing rate in the country. At 5.62 filings per 1,000 people, Alabama more than doubled the national average. Neighboring Tennessee and Mississippi were also among the top five states. It appears 2019 was no exception–Alabama has held the top slot for per capita filings for several years. Moreover, the state has so far continued to hold the lead in 2020. Even though we are at the end of the year, the data lags a bit and it certainly appears we will end up the highest again. 2020 Bankruptcy filing rates have dropped across the country due to the disruption of the pandemic, but Alabama remains far above the national average.
Why is the Bankruptcy Filing Rate High in Alabama?
Many different factors influence the decision to file for bankruptcy protection. No geographic region has cornered the market on financial stress. However, Alabama residents face some challenges that may help explain the high rate of filing. For example, according to Alabamapossible.org’s “2020 Barriers to Prosperity Data Sheet”:
Alabama is the 5th poorest state in the nation
The Alabama poverty rate is 16.8%–significantly higher than the 13.1% national poverty rate
10 Alabama counties, or 15% of counties in the state, have poverty rates above 25%
Only two Alabama counties have poverty rates below 10%
With those statistics in mind, it is no surprise that Alabama residents have more debt struggles than the average person in the United States. For instance:
39% of Alabama household have at least one debt in collections, compared with 31% nationwide
16% of Alabama student loan borrowers are in default, compared with 13% nationwide
Alabama has a 6% auto loan delinquency rate, compared with 4% nationwide
Alabama has a 6% credit card delinquency rate, compared with 4% nationwide
21% of Alabama households have medical debt in collections, compared with 16% nationwide
Alabama’s Pandemic Response has not Provided Much Financial Help
During a time when working people all over the country are suffering financial setbacks due to rising unemployment, rising grocery bills, and shrinking available credit, it stands to reason that those who had little buffer will be hit the hardest. However, the response has differed significantly from state to state. Recently, the global anti-poverty organization Oxfam ranked Alabama dead last on its list of the best states to work in during Covid-19.
The rankings were based on 27 data points, broken out into three broad categories: worker protection, healthcare, and unemployment support. Researchers compared all 50 U.S. states, the District of Columbia and Puerto Rico. Alabama scored poorly in all three categories, coming in 48th for worker protections, 49th for healthcare, and 52nd for unemployment support.
Some of the reasons for the state’s poor rankings include Alabama not having expanded Medicaid, lack of access to housing support, no grace period on healthcare premium payments, no cost-sharing waiver for Covid-19 treatment, low unemployment compensation caps and no housing assistance.
In other words, the state has not done much over the past nine months to offer relief or a safety net to the many who were already struggling, or those who were close to the edge and have seen their circumstances worsen as unemployment spiked, some basic costs increased, and families faced new obstacles.
Alabama is not alone in this. Three of the other four states that round out the top five for per capita bankruptcy filings–including Mississippi and Tennessee– are also near the bottom of the list. It is not surprising that people in states with fewer protections for workers, inferior unemployment benefits, more limited access to medical care and generally fewer safety nets are more likely to file bankruptcy.
Consumer Bankruptcy in Alabama
Too often, people in financial trouble look at filing bankruptcy as an admission of defeat. That can lead to self-destructive decisions, such as continuing to juggle debt for years, racking up interest and late fees and never seeing any improvement. It is important to remember that both
Chapter 7 and Chapter 13 bankruptcy were specifically created to help people who are overwhelmed by debt escape from that cycle and move forward.
In part, bankruptcy is designed to benefit individuals and families trapped by unmanageable debt. Nevertheless, it is important to understand that there is a larger purpose. When you are struggling to cover interest payments and late fees month after month, you are not spending money in a way that benefits the economy. When you resolve your debts and have disposable income again, you are free to spend your money in a way that supports jobs, increases the tax base, and otherwise benefits the community as a whole.
If you have been suffering through long-term debt challenges because you thought it was the honorable thing to do, you owe it to yourself, your family, and even your community to contact Bond & Botes to learn more about the relief bankruptcy can offer.
Bond & Botes Helps People Struggling with Debt
At Bond & Botes, we have been helping people with debt and creditor harassment issues for decades. We know your best first step is to gather accurate information. Therefore, we offer free consultations to help you make the right decision for you and your family. We can answer all your questions regarding Chapter 7 Bankruptcy, Chapter 13 Bankruptcy, stopping a foreclosure or wage garnishment, avoiding liens, stopping lawsuits, discharging medical debt, personal loans, payday loans, credit card debt, etc. We can alleviate your stress! We want to help and we can help you!
Bond, Botes, Sykstus, Tanner & McNutt, P.C.
102 South Court St, Suite 314, Florence, AL 35630
Phone: 256-760-1010 • Fax: 256-760-1023
Office Hours: Monday – Friday • 8am to 5pm
No representation is made that the quality of legal services to be performed is greater than the quality of legal services to be performed by other lawyers.