The number of Chattanoogans going broke fell for the second consecutive year in 2011 as the number of local jobs rose and property foreclosures declined.
But the rate of bankruptcy filings in the tri-state region was still nearly twice the rate of the rest of the country last year.
"The decline in total filings reflects the retrenchment in consumer spending associated with a down U.S. economy," Samual Gerdano, executive director of the American Bankruptcy Institute, said in a report on the annual bankruptcy filings. "As consumers continue to deleverage their debt and access to credit remains tight, bankruptcy filings will continue to decrease."
Nonetheless, an online survey by the group suggests most bankruptcy attorneys expect business bankruptcies to increase an average of 10 percent this year.
Last year, 7,273 Chattanoogans sought relief in U.S. Bankruptcy Court in Chattanooga. That was down 1.3 percent from the previous year and was 14.4 percent below the recession high in 2009.
But the local decline in bankruptcy filings was well below the 12 percent drop in bankruptcy filings nationwide during 2011, according to data compiled by Epiq Systems Inc. Nationwide, nearly 1.38 million Americans filed for bankruptcy in 2011, down from 1.56 million in the previous year.
"We're still very busy, and I was in my office working on cases on Sunday," said Eron Epstein, a bankruptcy attorney in Chattanooga for the past three decades. "But there has been a shift from the tsunami we saw from mortgage foreclosures in the past to more filings from medical bills and other consumer debt."
The number of property foreclosures in Hamilton County last year was down 24.1 percent from the level two years ago, according to the Hamilton County Register of Deeds.
But the South continues to be home to some of the highest bankruptcy states. Georgia ranked No. 2, Tennessee was No. 3 and Alabama was No. 5 last year for the most bankruptcies per capita, according to the bankruptcy institute.
The highest number of bankruptcies in Chattanooga were filed in 2003 when 8,819 consumers and businesses went broke. But the 2005 bankruptcy reform law limited who can qualify to file for debt protection in court.
Despite an improving job market in the past year, income gains were tepid, keeping many businesses and families struggling to pay their bills.
The U.S. Commerce Department reported Monday that inflation-adjusted income in the U.S. rose a mere 0.9 percent last year, or only about half the gain in 2010. Inflation-adjusted consumer spending rose 2.2 percent last year, which was up slightly from the previous year.