Bankruptcy Statistics for 2020
2020 was a year unlike any other. And, in the bankruptcy realm, it was also unusual. According to statistics gathered by legal services provider Epiq, last year saw the fewest bankruptcy filings since 1986! Despite the crumbling economy, fewer individuals and businesses filed for bankruptcy protection since Ronald Reagan was president. However, whether this downward trend can continue remains to be seen.
Only Commercial Chapter 11 Filings Are Up
Epiq’s data shows that Chapter 11 business filings were the only category that experienced growth in 2020. The new small business option, Subchapter V, probably had something to do with that. Last year saw 7,128 businesses file for Chapter 11 protection compared to only 5,518 in 2019. This represented almost 30% growth.
Many filings came from companies that were already struggling before the pandemic forced businesses to shut down. In fact, Chapter 11 filings peaked in Quarters 2 and 3, which testifies that these companies were struggling with debt even before the lockdowns. The pandemic was probably the last little shove these companies need to seek Chapter 11 protection to work out their debts.
Consumers Are Holding Strong
The real decline in bankruptcy filings came with consumer bankruptcies, Chapter 7 and 13. In 2020, there were 147,144 Chapter 13 filings, a nearly 50% decrease from 272,420 in 2019. And Chapter 7 non-commercial filings clocked in at 348,428 in 2020, down about 22% from 444,931 from the year before.
The news media has attributed these falling numbers to the economic stimulus package, in particular the $2,000 stimulus checks in April and expanded unemployment benefits that lasted through the summer. Congress recently passed a second stimulus package that will carry the country through to spring 2021 by providing additional checks and unemployment benefits.
Will Filings Jump in 2021?
Florida reported an unemployment rate of 6.4% in December 2020, which was nearly three points higher than a year ago. The unemployment rate also didn’t improve over the previous month, even though the economy continues to expand. Other states have seen an uptick in unemployment claims recently, which remain very elevated compared to pre-pandemic levels.
If Congress does not pass a third stimulus package in the spring, then unemployment benefits will end for millions of people. At that point, continuing to service debt could be difficult. Although consumers have cut some of their debt during the pandemic, they still have significant bills. Some experts are predicting a wave of bankruptcies to hit in the second half of 2021.
Let Us Discuss Your Bankruptcy Options
If you are struggling with debt, consider bankruptcy. At Nowack & Olson, PLLC, our Plantation bankruptcy attorneys know how hard it is to make ends meet in a recession, especially for those who are out of work. We will discuss the best time to file and what debts you can discharge through the process. Many people are surprised by how easy and affordable bankruptcy can be.
Call us today at 888-813-4737. We offer consumers and small businesses a confidential, free consultation. There is no reason to delay.