Job growth, low interest rates and a drop in consumer credit debt are helping to reduce a nagging problem for Georgians: bankruptcies.
Bankruptcy filings in the state were down 15 percent in the first three months of 2013 compared with the same period in 2012, according to new data from the American Bankruptcy Institute.
Georgia had 14,184 filings in the first quarter, compared with 16,339 filings during the period a year ago the ABI said, citing research by Epiq Systems Inc. The state still ranks No. 2 nationally when it comes to filings per capita.
Scott Pryor, an ABI bankruptcy expert, said low interest rates are a major reason for the drop in filings because people have a better chance of paying down less costly debt.
“As people are able to make any payments, they can get more bang for their buck,” Pryor said. He also cited more job growth and job security and the gradual recovery of the real estate market, including fewer foreclosures, higher home prices and fewer “underwater” mortgages, in which loan balances exceed home values.
“People who were underwater, even if they haven’t been able to reduce their debt, now may be able to break even [on home values] or have a slight equity in their home, and may be able to refinance to get a better deal,” Pryor said.
Nationally, bankrupcy filings in the first quarter were down 16 percent from the same period a year ago.
Scott Scredon, a spokesman for CredAbility, said the consumer credit counseling service also has noticed a slight drop in bankruptcy counseling services. He said March traditionally is a month that sees a spike in filings because people can use tax refunds to pay filing fees, which run from $1,200 to $2,500. Filings in Georgia were up 14 percent in March, compared with February, and up 34 percent from January.
North Georgia,which includes metro Atlanta, had the largest share of bankruptcy filings in the state, and personal bankruptcies accounted for most of the filings. Georgia had nearly 13,900 personal bankruptcy filings in the first quarter, and 70 percent of them were in North Georgia.
A Harvard University study found 62 percent of personal bankruptcies are due to medical bills. Other leading causes are job loss, mortgages, car notes, divorce and excessive use of credit cards.
Equifax, the consumer credit reporting service, said Thursday metro Atlantans, along with consumers nationally, are trimming their credit card debt. Atlantans owed $10.7 billion in credit card debt in January of this year, compared with $11.2 billion in January 2011.
Scredon, of CredAbility, said bankruptcy doesn’t have to be the only option for people struggling with debt.
Alternatives to filing include debt repayment plans, a service provided by his nonprofit organization.
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