Georgia continues to be one of the nation's bankruptcy leaders.

Georgia ranked No. 2 nationally for its rate of consumer bankruptcy filings in the first quarter of the year. The bankruptcy courts statewide processed 12,981 consumer filings during the quarter, up 16 percent from the same period in 2007.

Only Tennessee had a higher bankruptcy rate than Georgia. In Tennessee, the rate in annual terms was 1 bankruptcy filing for every 56 households. In Georgia, 1 in every 60 households sought legal protection from creditors, according to the National Bankruptcy Research Center, a California-based data firm.

Tennessee and Georgia also led the rankings for 2007.

"Georgia has historically had a large number of bankruptcy filings relative to the other states," said Jack Williams, a Georgia State University law professor who also serves as a resident scholar for the American Bankruptcy Institute, a nonpartisan research organization. "Rarely will it fall out of the top five."

In a comparison of the total volume of filings, irrespective of the rates, Georgia also stood out. Only California had more total filings in the first quarter than Georgia did.

"These numbers reflect the lives of real folks who are going to go through a significant amount of financial pain and emotional hurt, and that's never a good thing," Williams said.

A variety of forces push Georgia to the top of the bankruptcy charts, including Georgia's entrepreneurial spirit, state laws that are friendly to creditors and a growing economy that tends to attract young workers.

"We have a lot of entrepreneurs who take on a lot of risk," Williams said. "With risk comes not only success, but failure. That really is one of the primary drivers for us."

Experts view Georgia's fast foreclosure process as another powerful force in rates.

Filing for bankruptcy protection automatically halts a foreclosure and gives the homeowner more time to cover overdue mortgage payments. Most homeowners are at least a few months behind before a lender initiates a foreclosure, but once the process starts, a house can be sold on the courthouse steps in as few as 37 days. No state has a faster process than Georgia.

"That's a perennial issue," said Jeffrey M. Humphreys, director of the University of Georgia's Selig Center for Economic Growth. "The fact that we're in a housing recession accentuates that."

Filings at the state's bankruptcy courts usually spike in the days before the first Tuesday of every month, when state law mandates that foreclosure sales be conducted.

While bankruptcy filings were up in Georgia, states being hit hardest by declining real estate prices saw even larger jumps in bankruptcy petitions in the first quarter.

California saw the largest increase, with a 72 percent increase in filings to 23,956, according to the National Bankruptcy Research Center. Four other states hit hard in the mortgage meltdown —- Rhode Island, Florida, Nevada and Arizona —- also saw their bankruptcy filings jump by more than 60 percent in the first quarter, compared to the same period in 2007.

Foreclosures are high in Georgia, but the state is not suffering the declines in real estate values hitting other states. Housing prices statewide actually showed a tiny appreciation in the last quarter of 2007, Humphreys said.

"The bottom line is that our values are holding up fairly well, so even though people are going into bankruptcy, they aren't going in for the same reasons as people in states where home values are dropping like a rock," Humphreys said.

Indeed, the first-quarter statistics suggest that most Georgians entering bankruptcy are trying to keep their homes, not walk away. About 55 percent of Georgians who file for bankruptcy filed Chapter 13, which allows consumers to hold onto their house and car but requires that they repay a portion of their debts. A Chapter 7, chosen by 45 percent of Georgians who file for bankruptcy, is a liquidation in which most debts are wiped out, but so are all of a consumer's assets that aren't protected by exemptions.

Nationally, Chapter 13 filings accounted for 36 percent of bankruptcies, while Chapter 7 filings made up the other 64 percent, according to the research center.

In addition to foreclosures and failing businesses, Georgia's fast-growth economy also tends to make it vulnerable to high rates of bankruptcy.

The state tends to attract young workers who are vulnerable to layoffs and often don't have much of a cushion, Humphreys said.

States with the lowest bankruptcy rates are dominated by older workers who are less vulnerable during economic slowdowns.

"Georgia is never going to be low on the list simply because we are one of the fastest-growing states," Humphreys said.

 Staff
LOSING IT 
Georgia ranked second-highest in the nation's rate of personal bankruptcy filings in the first quarter of 2008.
Households per bankruptcy filing*
Rank/......Q1 rate ......Q1 rate......Percentage
State ......2007..........2008..........change 
1. Tenn. ....65.7..........55.8..........17.6% 
2. Ga. ......69.8..........60.1..........16.1% 
3. Nev. ....101.4..........61.2..........65.6% 
4. Ala.......80.9..........72.1..........12.2% 
5. Ind.......92.7..........75.9..........22.2% 
6. Mich. ....93.1..........76.6..........21.5% 
7. Ark. ....103.1..........84.0..........22.8% 
8. Ky.......105.4..........84.2..........25.1% 
9. Ohio ....104.6..........90.8..........15.2% 
10. Miss. ..108.6..........91.8..........18.4% 
Nation......151.3 ........119.1..........27.0% 
* Rates adjusted to annual terms.
Source: National Bankruptcy Research Center (www.NBKRC.com)