You may be surprised by 2020s bankruptcy trends. COVID-19 caused economic stress, so it is safe to assume that bankruptcy would be on the rise. But, this is not the case. In fact, 2020 saw the lowest bankruptcy filings since 1986. Read on to learn more about bankruptcy in 2020 and the predictions for the coming years.
Bankruptcy Trends of 2020
- The number of national bankruptcies filed in 2020 was the lowest since 1986 and nearly 30 percent lower than in 2019.
- This may be due to the fact that the federal court system was closed at the beginning of the pandemic, delaying filings.
- Bankruptcies are also considered to be a “lagging indicator,” meaning the effects of economic distress may not begin to show through bankruptcies until later on.
- Chapter 11 bankruptcy saw an 18.7% increase from 2019.
- Chapter 11 is most often used by businesses that hope to stay in business by renegotiating their debt.
Chapter 7 vs Chapter 11
Chapter 7 and Chapter 11 are two of the most popular forms of bankruptcy. Under Chapter 11 Bankruptcy, a business owner will work with his or her attorney to come up with a Reorganization Plan. With a Reorganization Plan, a business remains open and continues to operate. Any profit generated is used to pay operating expenses first, and then pay off a portion of the debt and eliminate the balance. On the other hand a Chapter 7 Bankruptcy will grant you a discharge of most of your debt, including credit card debt, personal debt, medical bills, foreclosures, and automobile repossessions. Generally, student loans and tax debt are not included. Under a Chapter 7 Bankruptcy, you are allowed to keep certain assets, such as bank accounts, automobiles, pension plans, IRA’s, and your house. In order to be considered eligible to file for Chapter 7 bankruptcy, you must receive credit counseling from a U.S. Trustee approved agency within 6 months before filing. Additionally, you will have to take a debtor education course in order for the state to grant you a discharge. Once these requirements are satisfied, you can begin the process of filing.
If you are facing financial struggles, your best option may be to speak with an experienced bankruptcy attorney. The prospect of bankruptcy can feel stressful and overwhelming, but our firm is here to advocate for you and walk you through the process each step of the way. Do not hesitate to reach out to speak with an experienced attorney.
CONTACT A BANKRUPTCY LAWYER TO DISCUSS YOUR DEBT OR COLLECTION ISSUE
Michael D. Pinsky, P.C. represents clients in bankruptcy actions and related matters. Please call 845-394-2616 or contact the firm online to schedule a consultation.