Bankruptcy filings are a measure of financial stress in individuals and businesses. They indicate that a person or company is unable to pay their debts and is seeking protection from creditors through the legal process of bankruptcy.
It is a solution that the government offers to give financially struggling individuals a chance to achieve financial stability. With the spread of Covid-19 globally and the occurrence of various economic issues, the number of bankruptcy filings has considerably changed.
Are Bankruptcy Filings Going Up?
Over the last century, bankruptcy filings have consistently been on the rise in the United States. According to data from the United States Bankruptcy Court, they steadily increased from 1980 to 2005. However, this trend came to a stop in 2006 when the number of bankruptcy filings decreased to around 600,000.
With the spread of the COVID-19 pandemic, there was a 29.7% decrease in the number of business and non-business bankruptcies in the U.S. The total number of filings for all chapters of bankruptcy dropped from 774,940 in 2019 to 544,463 in 2020. The decline in bankruptcy filings continued to decline in 2021 as the total number of filings recorded reached 413,616. By the end of 2022, the total number of filings for all bankruptcy chapters slightly decreased to 387,721.
As the number of bankruptcy filings continuously declined over the past years, some people think of it as a strange occurrence amidst the pandemic. The Covid-19 pandemic brought lockdowns in different areas around the world which led to a significant decline in business activities.
Contrary to what some people expected, the number of filings consistently dropped from 2020 to 2022. There are various reasons that explain this phenomenon.
Factors Affecting The Number Of Bankruptcy Filings
There are several potential reasons that can be attributed to the decrease in the number of bankruptcy filings over the years. Some of them include the policy responses from the government and the access to bankruptcy courts during the pandemic.
One of the potential factors that contribute to the decline of bankruptcy filing is the government’s policy response during the pandemic. It includes the PPP or the Payment Protection Program which is a loan funded by the United States Small Business Administration or SBA. This type of loan allows small business owners the funds to pay for their employees’ payroll of up to 8 weeks.
Another policy formed during the pandemic is CARES or Coronavirus Aid, Relief, and Economic Security Act which provides economic aid to families, American workers, and small businesses. These policies implemented by the government provided assistance to families and businesses which allowed them to stay afloat during the crisis.
Difficulty In Filing For Bankruptcy
The spread of Covid-19 has led to many policies and safety measures implemented by the government. With the limitations imposed on going outside and personally meeting people, applying for bankruptcy became difficult for many individuals.
It is one of the potential factors that affected the number of bankruptcy filings. Some businesses and individuals may have experienced difficulty in getting access to bankruptcy courts. In addition, meeting with counsel may have been more difficult for people because of the safety measures that were put into place to ensure the public’s safety during the pandemic.
File Bankruptcy With Lincoln-Goldfinch Law
The past few years have led to various circumstances including the decline of business activities. However, data shows that the number of bankruptcy filings in the United States has decreased. Now that Covid-19 policy responses are slowly relaxing, filing for bankruptcy may be less complicated.
The changes in the number of bankruptcy filings are signs of the financial stress and hardship being faced by many individuals and businesses in the United States. To help people get relief from financial difficulties, Lincoln-Goldfinch Law offers legal representation in bankruptcy-related cases, especially Chapter 7 and Chapter 13. Let Lincoln-Goldfinch Law assist you and achieve a fresh financial start.