The COVID-19 pandemic brought the economy to its knees. However, thus far, personal bankruptcy filings in 2020 are still trailing 2019’s figures. 2020’s trailing figures may be attributed to federal stimulus payments, loan forbearance, unemployment insurance enhancement, and other additional support provided by the Coronavirus Aid, Relief, and Economic Security (CARES) Act and the fact that many people are borrowing less. That said, despite the decline in bankruptcy filings this year, it is still possible for these numbers to increase due to the continued rise of unemployment.
According to an article that appeared in Forbes, many experts in this field are still anticipating a surge in bankruptcies toward the end of the year. Moreover, those expected to file for bankruptcy are more likely to be responsible individuals who had steady employment before the pandemic disrupted their lives. Another culprit for the potential rise in bankruptcy filings this year is the end of mortgage forbearance. In addition to having to resume making payments, banks can begin demanding homeowners immediately make up their missed payments, likely resulting in a wave of Chapter 13 bankruptcies.
If 2020 has taught us anything, however, it is that nothing is certain. When people do not borrow, consumer credit declines, creating less of a reason to file for bankruptcy. While it is uncertain whether personal bankruptcies will rise, Chapter 11 filings by businesses will certainly increase. Several large corporations are already seeking Chapter 11 reorganizations and it is anticipated this year’s figures may break all previous records.
Of course, it is important to remember that although the COVID-19 pandemic is unprecedented, the United States is no stranger to bankruptcy booms. 2020 is still unlikely to outdo 2005, which produced a historical spike in bankruptcies. Five years later, another peak hit as foreclosures climbed sharply. Ultimately, bankruptcy booms are not accurate indicators for assessing the health of the economy.
We are living in a dark and uncertain time and it is crucial to make modest predictions for the future.
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Many people consider bankruptcy a taboo word, but it can be a necessary step toward achieving a clean slate and a brighter financial future. At Family Law San Diego, our bankruptcy attorneys understand the difficulties many are facing as the pandemic continues to change our lives in profound and challenging ways. If you are struggling with debt, we can assist you in assessing your options.
Reach out to our law office today at (619) 577-4900 to set up a consultation with a member of our team.