Every year, our firm analyzes the number of bankruptcy cases in the nation. This year, we expected the number of bankruptcies in the nation to increase due to the pandemic. To our surprise, the number of overall bankruptcies actually decreased in 2020. According to the Harvard Business School, bankruptcy filings dropped almost 27% during January to August when compared to the same time frame as last year. This was a surprise to even the most renowned economists.
Chapter 7 bankruptcy filings fell by almost 1/3. This not consistent with past historical job loss, one of the driving forces in most bankruptcy cases. “Historically, the number one cause of consumer bankruptcy filings is job loss. This year, we saw the highest rates of job loss since the Great Depression. At the same time, we saw a decline in consumer bankruptcy filing rates—and not an insubstantial decline.” Raymond Kluender, an assistant professor in the Entrepreneurial Management Unit at Harvard Business School.
We suspect that stimulus funds and government aid has been able to keep families and individuals afloat. The article goes on to state that “[t]he historical relationship between unemployment claims and bankruptcy filings suggested there would have been more than 200,000 additional consumer bankruptcy filings in the second quarter alone. Instead, there were 81,000 fewer. For January through August, there were 139,000 fewer than expected.”
Another suggestion is that it may be difficult for an individual to get resources to file a chapter 7 and chapter 13 bankruptcy proceeding. “If you change the way that Chapter 7 operates so you don't have to pay for your bankruptcy attorney at the time where you are in the most desperate need to file for bankruptcy, [the filer] could instead pay filing and attorney fees over time. That could be very beneficial and allow people who currently can't afford [bankruptcy] to take advantage of the benefits that they're entitled to through consumer bankruptcy.”
Full Article on hbswk.hbs.edu (Havard Business School): COVID Was Supposed to Increase Bankruptcies. Instead, They've Gone Down.
If you are considering filing for bankruptcy, you’re not alone. We expect to see an increase in Chapter 7 filings in both Kansas & Missouri. Our attorneys are prepared to provide you with resources and financial options to help you make a decision and will guide you through the entire process.
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