Last week’s edition of the Atlanta Business Chronicle includes a series of articles entitled "Falling into Recession." One of these articles focuses on the high number of bankruptcy filings in the Atlanta area. Judge Joyce Bihary, the chief judge in for the Northern District of Georgia Bankruptcy Court is quoted extensively in this article. Judge Bihary asserts that the poor mortgage choices by homeowners has resulted in high default rates and record numbers of bankruptcy filings. The judge calls for improved financial literacy to help homeowners better understand mortgage products on the market and to avoid taking on more mortgage debt than they can afford.
Judge Bihary eloquently summarizes the role of the mortgage industry and lowered lending standards in her explanation of the current bankruptcy climate in Atlanta. In my view, however, there are other factors that have also lead to our current status as one of the busiest bankruptcy filing districts in the country:
- not only are lending standards lax for mortgages, they are lax for all kinds of other loans, including car loans, furniture loans, jewelry loans and especially unsecured credit card loans. The credit card industry in particular can claim credit for forcing many hardworking families into bankruptcy. WIth delinquency fees of $30, $40, even $50 and delinquency rates of as high as 29%, consumers who fall a little behind will end up a lot behind in short order.
- most consumers have little or no "rainy day" savings for periods of unexpected employment or illness. In my practice a common scenario involves a family that is getting by living paycheck to paycheck, but is thrown into crisis because of an unexpected job loss or interruption in income
The Atlanta Business Chronicle does not address how the BAPCPA changes to the bankruptcy laws have made debt relief much more complicated and expensive, with relief that is often incomplete.
I am pleased that a respected business newspaper like the Atlanta Business Chronicle is beginning to consider the impact of high bankruptcy filing rates on the region’s economy in general – it would be nice, however, if they would look a little more deeply into more of the issues that impact our financially troubled community.