The U.S. Bankruptcy Court building on East 11th Street is seen downtown on Friday, Jan. 11, 2019, in Chattanooga, Tenn. / Staff file photo

The number of Chattanoogans going broke fell last year to the lowest level in 13 years as a growing economy helped trim the number of bankruptcy filings in the Chattanooga office of the U.S. Bankruptcy Court by more than 7% from the previous year.

But Tennessee, Georgia and Alabama continued to lead the nation in the rate of bankruptcy filings in 2019, according to the U.S. Bankruptcy Institute.

"Bankruptcy filings tend to track the overall economy," said Larry Ahern, a bankruptcy lawyer and adjunct professor of law at Vanderbilt University who previously practiced in Chattanooga. "But we do tend to see more people seeking bankruptcy protection in states like Tennessee, Georgia and Alabama with nonjudicial foreclosure and wage garnishment laws that allow creditors to foreclose on homes or garnish wages without having to go to court, in most instances."

Filing for bankruptcy allows debt-burdened consumers and businesses to get relief from their debts by either liquidating their assets in a Chapter 7 filing or reorganizing their finances with court protection under a Chapter 13 filing. Bankruptcies are often sought to avoid foreclosures and loss of homes or garnishing of wages to repay a debt.

Top states for bankruptcy

The Mid-South states continued to have the highest rates of bankruptcy filings in 2019 with more than twice the U.S. average of 2.44 filings per 1,000 residents in Alabama and Tennessee last year.

1. Alabama, 5.62 filings per 1,000 residents

2. Tennessee, 5.29 filing per 1,000 residents

3. Georgia, 4.38 filings per 1,000 residents

4. Mississippi, 4.19 filings per 1,000 residents

5. Illinois, 3.71 filings per 1,000 residents

Source: American Bankruptcy Institute, data compiled by Epiq Systems, Inc

Chattanoogans are far more likely to try to reorganize their finances in bankruptcy court under a Chapter 13 filing, rather than simply try to cancel their debts and liquidate their holdings under a Chapter 7 filing. Last year, nearly 60% of the bankruptcies filed in Chattanooga were Chapter 13 filings. Nationwide, about 60% were Chapter 7 flings by consumers.

"Dating back to former Bankruptcy Court Judge Ralph Kelley [who served on the bankruptcy court in Chattanooga from 1969 to 1993] Chattanooga and other courts in Tennessee have worked to make chapter 13 filings work for consumers and creditors," Ahern said.

But in Tennessee, the share of persons seeking debt relief of some type in bankruptcy court was still more than twice the national average last year, even though bankruptcies fell in Chattanooga and rose nationwide.

According to data compiled by Epiq Systems for the American Bankruptcy Institute, total consumer bankruptcy filings increased 0.17% to 718,553 nationwide for calendar year 2019. The 38,944 total commercial filings during calendar year 2019 were up 2.4% from the previous year.

But in the Chattanooga district of East Tennessee, the total number of bankruptcy filings was at its lowest level in 2019 since 2006 and was down more than 35% from the peak reached a decade earlier during the Great Recession.

Chattanooga bankruptcy filings

The number of cases filed in U.S. Bankruptcy Court in Chattanooga fell last year to the lowest level in 13 years and were down 35.3% from the peak filings reached in Chattanooga a decade earlier.

2019 - 5,488

2018 - 5,904

2017 - 6,011

2016 - 5,689

2015 - 5,747

2014 - 5,882

2013 - 6,515

2012 - 6,640

2011 - 7,273

2010 - 7,357

2009 - 8,487

2008 - 7,252

2007 - 5,782

2006 - 4,630

Source: Chattanooga division of the U.S. Bankruptcy Court for Eastern Tennessee

Although Tennessee's state government has some of the lowest per capita debt levels among all U.S. states, consumers have not always been as thrifty and median household income in Tennessee averages 16% less than the U.S. as a whole. As a result, Tennessee has been one of the top states for bankruptcy filings for years.

"In the past year, Tennessee was recognized as among the states with the best fiscal stability; one of the top three best-funded public pension plans in the nation; and triple A bond ratings with all three major bond rating agencies," Tennessee state Treasurer David Lillard Jr. said Friday. "But Tennessee has too many citizens mired in a culture of borrowing and bankruptcy. These bad financial decisions keep Tennessee families from achieving the higher per capita income that leads to an improved quality of life."

To help more Tennesseans avoid going broke, the state created the Tennessee Financial Literacy Commission in 2012 and Lillard has worked to fund and support the nonprofit commission, which has helped train more than 4,200 elementary and middle school teachers to incorporate financial literacy into their daily lessons and offered free online programs knwon as Vault- Understanding Money.

"To date, more than 19,000 Tennessee students have utilized the online resource and have increased their financial literacy scores by 36% on average," Lillard said.

Contact Dave Flessner at or at 423-757-6340.