Blue Collar Muse

Listening to the radio while working this afternoon I heard a quick stat in passing that referenced the Volunteer State. I jotted it down and fired up the computer when I got home for a little research. For the record, Tennessee has the highest rate of bankruptcy in the nation and Shelby County has the highest rate of any county in the nation when it comes to individuals filing bankruptcy. So says The Washington Post. In fact, Tennessee’s rate of 5.8 persons per 1,000 declaring bankruptcy is over two times the national average of 2.52 per 1,000. The next closest states are Georgia at 4.87 per 1,000 and Alabama with 4.77 per 1,000. During a time when, thanks to recently enacted federal laws, rates of bankrputcy are leveling or even declining, Tennessee is going against the tide.

The question is, of course, why? The article offers several explanations, all of which make some sense, at least at first.

Economic and social factors such as low paying jobs and high divorce rates often lead to financial hardship, but local bankruptcy experts say the sheer frequency of filings may also be whittling down the social stigma of filing.

“If your neighbor does it, it’s more likely you will do it,” said Dena K. Wise, a family economics specialist at the University of Tennessee. “It may be that (bankruptcy) has become something common among some certain neighborhoods.”

Still, the article is quick to point out:

Economic conditions play an important role in bankruptcy filings. But economics alone don’t explain the high rates in some southern states. Mississippi and Louisiana, for example, have the nation’s highest poverty rates. Yet the rate of consumer bankruptcy filings in those states is lower than in Georgia, Tennessee and Alabama. Mississippi’s rate is 3.46 filings per 1,000 people. Louisiana’s rate is 2.88 per 1,000.

Other experts hold different opinions.

Bankruptcy expert Robert Lawless, a law professor at the University of Illinois, said that many local lawyers tend to adhere to old filing traditions and may not consider alternative options.

No matter how poor an area is, Lawless said, lawyers are most often the figures guiding financially distressed residents through legal options.

Still more experts weigh in:

Financial experts such as former Federal Reserve Chairman Alan Greenspan have suspected for years that declining social stigma is a cause of rising bankruptcy rates. During his testimony over bankruptcy code amendments which began in 1999, Greenspan told Congress that “personal bankruptcies are soaring because Americans have lost their sense of shame.”

There is no direct way to measure stigma, but its presence can be calculated through other social behavior, according to scientists. A 2006 study by the Federal Reserve Bank of Kansas City found certain social characteristics, including divorce rates, poverty and even religion can affect a population’s stigma toward filing.

The Federal Reserve study found that access to legalized gambling is also an important determinant of bankruptcy filings. The farther a county is from a casino, the lower its personal-bankruptcy filing rate is likely to be.

One wonders what Steve Cohen is thinking right about now.

For two-thirds of the state, discussion of casino gambling is little more than intriguing cocktail conversation—a collection of “did you knows,” “how about thats,” and “what ifs.” For East and Middle Tennessee, there’s no pressing financial need to spur casino-friendly initiatives, little day-to-day reminder of its absence, and outside of the circumstantial case one can make for it being a good fit with Gaylord, few realistic contenders in terms of location. For West Tennessee, and in particular Shelby County and the city of Memphis, it’s a different story. “Memphis needs it,” Rep. Cohen says. “It’s crazy for Memphis not to have it. Memphis could be a phenomenal riverboat gambling town. Instead, all the jobs and taxes are going to Mississippi. Mississippi should be sending us a thank-you letter every week.”

“The reality is, Tennessee already has gaming,” says Shea Flinn, the interim replacement for Cohen’s vacant Tennessee State Senate seat during the most recent legislative session.

“People in Memphis can drive across the bridge and be in Arkansas to gamble in five minutes,” continues Flinn, who during his stint introduced a resolution that called for a constitutional amendment allowing casino gaming in Tennessee. “In 25 minutes, they can be in Mississippi. Combine that with the reality that is Internet gambling—all the harm we’re going to have is here, and it’s not going to go away. We have the disease, but we don’t have any of the benefits from the increased revenue, which is staggering.”

The final explanation offered seems to be medical bills as they relate to availability of health insurance.

Some states that don’t struggle with poverty may have high numbers of residents without health insurance. Nevada, which ranks among the 10 states with the highest bankruptcy-filing rates, has a much lower rate of poverty than the national average. However, according to the Kaiser Family Foundation, more than 18 percent of its residents are uninsured _ three percentage points above the national average.

Of course, when talking about Nevada, the gambling argument needs to be factored in as well.

The only bright spot seems to be that the bulk of filings seem to be of the Chapter 13 variety which allow for the gradual repayment of debt by filers. Even that factor has Tennessee roots.

Many bankruptcy experts suggest the choice to file bankruptcy may have significant religious undertones in Bible Belt states. The most popular filing choice, Chapter 13, gives debtors a chance to repay creditors, a characteristic in line with the Biblical teaching concerning responsibility and forgiveness, experts say. (snip)

Both Alabama and Tennessee played leading roles in the development of Chapter 13 bankruptcy, which was widely encouraged by prominent state politicians. According to southern bankruptcy lawyers, coaching clients to file for bankruptcy has been ingrained in the legal culture for decades.

Chapter 13 was established with the Chandler Act of 1938, which was named after Rep. Walter “Clift” Chandler, a former Memphis mayor and staunch bankruptcy advocate.

“It was viewed as a way to get bills paid,” said Ben Sissman, a Memphis bankruptcy attorney. “Tennessee lawyers got interested, judges got interested, and bankruptcy became more practical for people.”

For those ascribing to the ‘a picture is worth a thousand words’ theory, here’s a fascinating picture. This graph is from 2004 and based on 2003 data but it doesn’t seem to significantly deviate from the Washington Post’s information. In fact, Memphis was in better shape then than now. What I find interesting is that our highest in the nation rate of bankruptcy is evidently being driven by about 15 counties in the state with bankruptcy rates of 5 - 10 per 1,000 including 3 with rates of 15 to 100 per 1,000 and one county with a stunning rate of over 100 per 1,000.

This visual depiction of behavior is illuminating. The article explores how health insurance, religion, economics and proximity to gambling impact the rate of bankruptcy. All this data is discussed dispassionately as data for Tennessee, the state. Then one sees the picture and, if one is honest, one wonders why politics isn’t discussed as a variable. It’s possible it is included in the catchall observation that as rates in certain areas rise and remain high, it is increasingly seen by others in the area as a viable option. Maybe that explains the data from southwestern Tennessee. It is quite possible that proximity to gambling is to blame or some other factor already discussed.

But I wonder if the attitude that Entitlement Programs hammer into people over time don’t have an impact. I’m entitled to have all this stuff from the government; I’m entitled to have all this stuff from companies and credit cards and when I can’t pay for it, the easiest option is to either repudiate the debt or restructure it so that repayment is on terms more favorable to me than the ones I originally agreed to. The one thing that isn’t in dispute is that regardless of why people are declaring bankruptcy the results for the rest of us are the same. Just like with Entitlements, it’s the rest of the country, the ones producing and working hard and being responsible that are paying for those that aren’t. Higher taxes and higher prices are the legacy of bankruptcy and that seems quite in concert with Democrat politics.

Thinking this is probably the only time this subject will be raised in Tennessee …

Blue Collar Muse

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This entry was posted on Monday, July 23rd, 2007 at 3:15 pm and is filed under Business, Individual Responsibility, Liberal, Politics, Talk Radio, Tennesee Tips. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.