Post COVID-19 Bankruptcy Boom
Will There Be a Post COVID-19 Bankruptcy Boom?
The average U.S. household debt loads are now higher than ever in the past. The COVID-19 pandemic has also created mass economic disruption. Jobs have been lost and interrupted. Mortgage defaults are higher than any time in the last 10 years. A post COVID-19 bankruptcy boom could be right around the corner.
Government Intervention Caused Further Delay
A new “boom” of bankruptcy filings was likely on the way already in the early months of 2020. Record debt loads had already demographically pushed many households into filing Chapter 7. The slow-down of the COVID-19 pandemic pushed back filings as 2020 progressed. Most people were more concerned about protecting themselves from the illness instead of taking care of long-term financial matters.
The greater cause of delay, however, came from government intervention during the COVID-19 pandemic. Collection activity came almost to a complete halt in most U.S. courts. Evictions likewise came to a halt in most U.S. courts. In addition, generous economic distributions were frequent. With government protection and provision, the long-anticipated wave of new bankruptcy cases was held off.
The New Boom of Bankruptcy May Intensify
Due to COVID-19 and extensive government intervention, it is likely that next year’s bankruptcy “boom” may be greatly intensified. Evictions and foreclosures have been held off for over a year. Government subsidies and income programs are coming to a halt, including the extended unemployment coverage. The first step to getting back to “normal life” for many will be filing for relief in bankruptcy.
The record debt load will also create a new wave of default in payments. With the common household finding themselves underwater with debt, Chapter 7 and Chapter 13 filings will be on the rise. New bankruptcy legislation has also been proposed in Congress. If new legislation is eventually passed, then the new boom bankruptcy filings may further intensify.
Make sure to get the latest news on bankruptcy here.
