Many individuals remember when the housing market fell, resulting in financial hardships for many businesses and ordinary people during the Great Recession. Bankruptcy filings for private and commercial purposes grew substantially, and bankruptcies and repossessions followed suit.
When COVID-19 resulted in an international quarantine, the business writing sector initially reported the projected numbers for bankruptcy filings would exceed that of The Great Recession.
What is unique about the financial results of the COVID-19 pandemic is that the inverse has occurred. In today’s blog from Groce & DeArmon, P.C., we will explore the reasons behind why COVID-19 hasn’t led to more bankruptcy filings.
Has Anyone Filed for Bankruptcy?
Absolutely, just fewer than originally anticipated.
According to the Harvard Business School article COVID Was Supposed to Increase Bankruptcies. Instead, They’ve Gone Down, personal (consumer) bankruptcies dropped 28 percent year-over-year from 2020 to 2021.
Chapter 11 business bankruptcies climbed 35 percent year-over-year and greatly increased to 194 percent for corporations with assets over $50 million. When adding in small businesses the number actually decreased by 1 percent.
So the answer to the question “Why have fewer people filed for bankruptcy?” is more focused on the varying factors surrounding consumers and businesses that have been affected by the pandemic.
Fewer filings doesn’t necessarily mean fewer people are struggling financially. According to the American Bankruptcy Institute, filings are more than likely just delayed due to the public safety protocols put into place across the country.
Many law firms changed the way they interacted with clients by reducing traffic inside the office. Individuals that could have considered filing might have been delayed from stepping out into public due to fear of contracting the virus.
Government Assistance and Support
CARES Act assistance could also have contributed to the delay in filings. The CARES Act was issued on a widespread level, and fulfilled many temporary financial needs.
Stimulus checks, student loan interest and payment delay, as well as unemployment filings have also provided cushioning for income that didn’t exist during the Great Recession.
Receiving this kind of assistance, as well as reading the latest legislation stating debt forgiveness received before 2025 would be tax-free, might be enough to make people hold off on filing for bankruptcy.
Many people are probably trying to re-organize their financial assets first before considering something as legally in-depth as filing for Chapter 7 bankruptcy.
Talk to Groce & DeArmon, P.C.
If you have questions on filing for bankruptcy or are requesting assistance with organizing your financial assets, we can discuss your options and help you determine the best course of action for your individual situation. Our first consultation is always free. Contact Groce & DeArmon, P.C. or call toll-free 1-800-640-3706 in Missouri or (417) 862-3706.