In a recent article for Bloomberg Law, Mark Hall and I examined why consumer bankruptcy filings have not (yet) increased during the COVID-19 pandemic as initially predicted, despite a significant uptick in commercial Chapter 11 filings. Through the end of September, consumer bankruptcy filings were behind the pace of filings for 2019 and for the three year period of 2017-2019. Potential explanations include:
- The government assistance available earlier this year to small businesses through the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”), such as loans through the Paycheck Protection Program (PPP), which helped businesses retain employees.
- The temporary increase in unemployment benefits by $600, and 13 weeks of additional eligibility.
- The availability of low interest rate loans, which in particular, may help individuals avoid filing for Chapter 13 to save their homes. Relatedly, there have been moratoriums on foreclosures.
- Increase in savings resulting from a general pullback in consumer spending.
- A belief or hope that the pandemic is ephemeral and that “normalcy” may soon return.
Meanwhile, commercial Chapter 11 filings since the start of the pandemic in March through the end of September are up nearly 30% compared to the same period last year.
However, as the pandemic persists and federal aid programs have ended – with the prospects for further government intervention presently murky – there is a strong potential for consumer bankruptcy filings to increase.