As government support buttressed income and staved off some obligations, the number of individuals filing for bankruptcy dropped precipitously during the pandemic, The Wall Street Journal (WSJ) reported.
Bankruptcy filings by individuals under Chapter 7 fell 22 percent in 2020 in contrast to the prior year, WSJ reported, citing Epiq data. Individual filings under Chapter 13 plummeted by 46 percent.
However, Epiq indicated that business bankruptcy filings climbed 29 percent, as over 7,100 companies looked for Chapter 11 bankruptcy protection in 2020, according to WSJ.
People usually file for bankruptcy after financial trouble by a medical emergency, divorce or joblessness, WSJ reported. A number of individuals who seek bankruptcy do so under Chapter 7, letting them get rid of unsecured obligations like credit card debt. However, in many instances, it makes them relinquish assets like automobiles, homes or retirement savings.
Experts claim that that the halting of evictions, student debt obligations and residential foreclosures by the U.S. government have helped hold down bankruptcies, although they are concerned that bankruptcy rates could increase once there isn’t more aid, according to WSJ.
Moreover, household spending has fallen as individuals have remained in their residences, called off travel and remained apart from others to steer clear of COVID-19, WSJ reported.
Multiple rounds of government assistance buttressed incomes with direct payments to households and bolstered joblessness benefits.
The news comes as Epiq reported earlier in 2021 that government pandemic assistance helped bankruptcy filings reach a 35-year low in 2020.
In its report on 2020 bankruptcy statistics, the company determined that 2020 had the lowest numbers as of 1989, with just over 529,000 over all chapters.
December saw 34,304 bankruptcy filings overall, which was also the lowest monthly total as of January 2006.
Drilling down into the numbers, Chapter 13 non-commercial filings were down 46 percent last year, with 147,144 filings coming in at under 272,420 filings in 2019. Chapter 7 non-commercial filings decreased 22 percent in 2020 with 348,428 in new filings, lower than the 444,931 for 2019.
By contrast, commercial Chapter 11 filings increased year over year, with 7,128 filings last year in contrast to 5,518 in 2019.
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