As lawmakers in Washington, D. C. continue to wrangle over whether and how to continue providing federal coronavirus aid, the nation’s bankruptcy courts have become a leading indicator of the impact that the virus has had on consumers and businesses alike. Reports indicate that the number of businesses filing for Chapter 11 protection rose 52% in July from last year, and personal bankruptcy filings are up as well.

The rise in the number of bankruptcy filings is expected to continue for the foreseeable future, and especially if the government fails to come up with additional support for those who have been hardest hit by the pandemic. The first seven months of 2020 saw a 30 percent rise in the number of Chapter 11 filings from the previous year, with approximately 4,200 businesses submitting bankruptcy paperwork by July. Though May saw the highest number of business bankruptcy filings for the year, the month of July saw 642 new filings. Many of these filings came from prominent retailers such as Ann Taylor and Brooks Brothers which have been hard hit by the inability of consumers to shop and the drop in the need for business attire as employees continue to work from home. Restaurant and entertainment businesses have also suffered.

As for personal bankruptcies, they do are on the rise, with July seeing roughly 40,000 personal filings. This represents an 11 percent increase from three months earlier. Experts say that much of the rise comes from pre-COVID debt issues being combined with a lack of sufficient new income as a result of the pandemic’s furloughs and closures. Chapter 13 filings, which are more expensive and rely upon the ability of the debtor to restructure their loan based on their income, fell by 57 percent as compared to the previous year. There were only 9,800 new filings, while the number of businesses seeking restructuring through Chapter 7 fell by 21 percent for the month. It is hoped that the introduction of eviction moratoriums and mortgage forbearance programs will help to slow this upward trend.

Choosing to file for bankruptcy is a difficult, emotional decision under the best circumstances, but when it is a result of an event that is completely out of your control it is even more of a challenge. For guidance as to whether bankruptcy is the right choice for you, contact our office today to set up a time for a consultation.

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