Posted on Mon, Apr. 21, 2008

GULFPORT -- The number of bankruptcies nationwide grew considerably last year over 2006 with Mississippi ranking in the top 10, but not on the Coast, where a post-Katrina world exists.

"Down here, we're still well below the national levels," said William Wessler, attorney and board-certified bankruptcy specialist.

"Particularly in South Mississippi, the rate of filing has been real low, I think because of FEMA money, insurance claims, grants," Wessler said. "And extending unemployment, all that resulted in less bankruptcies rather than what usually happens after a major hurricane."

A study at the University of Illinois College of Law in 2005 showed historically there is a tremendous increase in bankruptcies one and two years after a major hurricane, Wessler said. But the opposite happened after Katrina.

"We don't fit the mold. I think it must be because this one was so bad. There was so much federal assistance provided that it skewed the statistics and we don't fit."

Wessler said that Mississippi's ranking in the 10 states with the highest per capita filing rates was a little surprising, though he said that as you move away from the Coast the number of bankruptcy filings increases rapidly.

The other nine states are Tennessee, Georgia, Alabama, Indiana, Michigan, Ohio, Nevada, Arkansas and Kentucky.

Also, the bankruptcy laws changed in the fall of 2005 and made filing more difficult and expensive, so there was a rush to file before Oct. 15, 2005, and a drop in the filings for 2006.

With the two factors, the number of bankruptcies that attorney J.C. Gardner files now is less than half of what his offices - two on the Coast and one in Hattiesburg - were doing pre-Katrina.

The slowdown is so acute that Gardner said there are really only four law firms on the Coast primarily handling bankruptcies.

Wessler said he has shifted his focus to creditor representation and collection.

Foreclosures generate Chapter 13, or payment-plan, bankruptcies, but even foreclosures have been slower on the Coast. Wessler said, however, he has noticed the numbers starting to rise.

Even the nationwide increase in 2007, a 38 percent jump over 2006, is a little misleading.

Total bankruptcy filings rose to 850,912 in 2007, from 617,660 the previous year, according to the American Bankruptcy Institute, citing data from the Administrative Office of the U.S. Courts.

Despite the increase, that's still well below the levels earlier this decade, when bankruptcies averaged 1.5 million each year.

Wessler explained that in 1979, a change in federal law made it easier to file bankruptcy, so the number grew dramatically each year. Then in 2005, the law put a halt to that.

"It's coming back up, but I think it's back up slowly," Wessler said. "I don't think the numbers will ever be that high again."

The Associated Press contributed to this report.