Zywicki on Bankruptcy Surge in Georgia

Consumer bankruptcies in Georgia swelled by 23 percent statewide in the second quarter of this year, and Professor Todd Zywicki does not see an end to that trend in the near term.

"I would expect to see the numbers continue to rise over the next couple of quarters until the residential real estate situation gets straightened out," Zywicki told the Atlanta Journal-Constitution. "I don't think we have reached the finale of that."

Georgia has the third-highest number of consumer bankruptcy filings in the United States, a statistic attributable, in part, to unemployment and current problems in the mortgage industry. Some experts believe that Georgia's rapid nonjudicial foreclosure process, which circumvents the courts, is an additional factor fueling the increase in filings, since bankruptcy can be the only viable option for homeowners who have fallen behind in morgage payments.

Bankruptcy filings surge in Georgia, The Atlanta Journal-Constitution, April 28, 2008. By Carrie Teegardin.

"Georgia has been at or near the top of the bankruptcy charts for years. Most experts believe that the state's high filing rate is linked to Georgia's fast 'nonjudicial' foreclosure process that requires no involvement by the courts. Once a homeowners falls behind and a lender initiates foreclosure, a house can be sold on the courthouse steps in as few as 37 days. No state allows a faster process.

"Filing for bankruptcy protection automatically stops a foreclosure sale and is the only real option for many Georgia homeowners desperate for time to catch up on payments.

"About 54 percent of Georgians who filed in the second quarter filed for Chapter 13 protection, which allows consumers to hold on to a house and car but requires that they repay a portion of their debts. A Chapter 7 filing, chosen by 46 percent of Georgians who file for bankruptcy, is a liquidation in which most debts are wiped out, but so are all assets that aren't protected by exemptions. Nationally, 32 percent of consumers opted for Chapter 13, while 68 percent chose a Chapter 7.

"The federal bankruptcy court based in Atlanta typically has more Chapter 13 filings than any bankruptcy court in the nation."

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