Since the pandemic, the bankruptcy trend has not progressed according to history from previous economic downtimes.
LEXINGTON, KY, November 22, 2022 /24-7PressRelease/ — Experience from previous economic crises before the pandemic has shown that there should be a sharp increase in bankruptcy filings. A significant case in point is the great recession from 2007-2009, which recorded the most prolonged economic downturn since World War II. Bankruptcy filings rose to 60,837 in 2009, from 28,322 in 2007.
The same trend, with more extensive variations, was expected during the 2020 pandemic, with the government shutting down nearly the entire economy. But, to the surprise of most bankruptcy scholars and bankruptcy organizations, the trend has been different, with the number of filings going in the opposite direction.
Starting With the Expected Bankruptcy Wave During the Pandemic
Lexington bankruptcy attorneys at Bunch & Brock, Thomas and Matthew Bunch, talk about how several factors from the pandemic have affected bankruptcy in America.
“Contrary to what experts expected, the number of businesses and non-businesses that file for bankruptcy has continued to drop since the pandemic,” Thomas Bunch continues. “The enormous wave of bankruptcy filing that experts expected in 2020 didn’t occur, with a significant apparent reason being the tremendous amount of stimulus money that supported the economy.”
The Trend of Decreasing Bankruptcy Filings
According to statistics released by the Administrative Office of the U.S. Courts, business and non-business bankruptcy filings have fallen from 773,375 in 2018, to 383,810 in 2022. Compared to the number in 2021, business and non-business filings reduced by 18.7% and 11.4%, respectively.
“With the U.S. Congress passing the $2.2 trillion stimulus bill, also known as the CARES Act of March 2020, to help reduce the pandemic’s economic damage, there was considerable support to help families,” Matthew Bunch says. He continues, “Firms that may have needed to file for bankruptcy could lean on the support from the stock market, which provided access to equity capital.”
Ongoing Bankruptcy Trends by Chapter
According to statistics released by the Administrative Office of the U.S. Courts, the decreasing trend in bankruptcy filings remains valid for Chapters 7, 11 and 12. However, Chapter 13, which involves debtors’ evaluating and reorganizing their finances to repay creditors within three to five years, increased between 2021 and 2022 by over 25%.
About Bunch & Brock
Bunch & Brock has over thirty years of experience supporting clients to yield impressive results in bankruptcy, estate and business law cases. With its seasoned team of bankruptcy lawyers, the firm has built a solid track record in helping persons, families and businesses settle bankruptcy cases successfully.
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