The big news topic in the bankruptcy world lately has been that bankruptcy filings are up in March 2021 compared to February 2021. The increase appears to be almost 40%. But the numbers don’t tell the whole story. When the actual amount of work days in March and February 2021 are compared, the increase is only around 15%. But bankruptcy filings have been decreasing for years, so any increase is still an increase, correct?
Maybe. Bankruptcy filings are still down from pre-covid numbers. Significantly. And pre-covid numbers were already extremely low. The lowest we have seen in over 15 years. So what happens next? Will the numbers continue to go up as the preventive measures Congress placed against creditors to protect debtors during covid expire? What about the mortgage forbearances? Frankly, the stories from clients and letters from mortgage companies about the mortgage forbearances and modifications seem like a repeat of 2008. You know, the mortgage crisis. Will mortgage companies start demanding past-due amounts and people turn to bankruptcy to prevent foreclosure? Maybe.
But could bankruptcies continue to remain at low numbers for years to come? Possibly. People were working hard to continue to pay debts at the beginning of covid, although that trend has stopped. People have been living from their savings accounts, so they may not have money to afford an attorney. Maybe more relief will come to debtors from the government. Frankly, nobody knows.
In my experience as a bankruptcy attorney, I have found that bankruptcy is a psychological decision. People who hire me have been experiencing financial hardship for months to years trying to avoid filing for bankruptcy only to find they can’t keep up anymore. I also feel that bankruptcy filings increase as the economy improves. When times are hard, people tend to play it safer with their money. They can’t purchase a large ticket item or take a financial gamble confident that they will receive a bonus that will allow them to recover. People don’t know how bad it will get financially, so they wait. Filing for bankruptcy means a commitment to improve your finances. How can someone make that commitment right now when no one knows what will happen next?
I do believe that bankruptcy filings will increase to above the pre-covid filing numbers, but how fast and how much of an increase will it be is anyone’s guess? If you are struggling and want to explore your options, please contact us at our office for a free, no-obligation consultation.