As we look at Bankruptcy, we can see insolvency in various states in the United States.
- For the last few years, the news regarding the state of the economy in the United States has not been good.
- The federal government has not managed to have a balanced budget since 2001. Unemployment remains high and Washington politicians continue to argue about all financial matters.
- Individual states also have many problems.
- Forty-nine of the fifty states, Vermont being the exception, have legal requirements to keep balanced budgets. Many are finding this difficult if not impossible.
States – Insolvency
There are sources that argue that as many as 32 states are now insolvent. These sources use statistics regarding the amount of funds borrowed by each state from the federal government. Those states that are said to have borrowed more than $1 billion include:
- California
- Michigan
- New York
- Pennsylvania
- Ohio
- Illinois
- North Carolina
- Indiana
- New Jersey
- Florida
- Wisconsin
- Texas
However, the argument that these states are bankrupt is simply not true. Many states have difficulty balancing their budgets through spending cuts and taxation. Often, the term ‘bankrupt‘ is erroneously used to refer to any person or entity that is unable to resolve spending issues.
Bankruptcy is a legal procedure that is available to private individuals, businesses, and municipalities. Municipalities with insolvency issues can file bankruptcy.
There are three basic types of bankruptcy: Chapter 7, Chapter 11, and Chapter 13.
Chapter 7
- applies to both individuals and businesses. This type of bankruptcy involves the liquidation of all non-exempt assets. However, all your debts are eliminated (Some exceptions may apply).
Chapter 11
- applies to both businesses and individuals (who exceed the debt limit for a Chapter 13).
Chapter 13
- Applies to individuals only – not businesses.
- Payments/debt repayments are spread out over a period of time.
- Usually 5 years and not all your debt must be paid back (some exceptions may apply).
Can States file Bankruptcy? - NO
Bankruptcy Exists for:
Individuals & Businesses
Filing Bankruptcy Can:
Eliminate Debt Completely Work out a Payment Plan
Rank
1
2
3
4
5
6
7
8
9
9
State
Mississippi
Tennessee
Nevada
Georgia
Illinois
Arkansas
Alabama
New Jersey
Delaware
Louisiana
Bus. BK/100K Bus.
149
140
16
131
139
125
90
263
1.912
100
Total Score
100
97.83
95.65
93.48
89.13
88.04
83.70
82.61
79.35
79.35
Note: Data on personal and business bk filing comes from U.S. Courts from Q3 2022 to Q3 2023
Source: Forbes Advisor
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- Insolvent?
- Considering Your Options?
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