Could Consumer Bankruptcy be an Issue for Congress?
The COVID-19 emergency has resulted in millions of Americans losing their jobs. Prior to the pandemic, many consumers were already struggling to repay debts, and some were considering personal bankruptcy as an option. Shortly before the COVID-19 pandemic closures began, a number of consumers in Illinois had recently filed for Chapter 7 bankruptcy or had finalized a Chapter 13 bankruptcy repayment plan. Many financial experts are predicting that the rate of consumer bankruptcies will soar as a result of the coronavirus pandemic. It is unclear whether the current structure of the U.S. bankruptcy courts will be able to handle that “coming wave of bankruptcies,” according to a recent article in Roll Call. Indeed, as the article suggests, “courts could be overwhelmed by a record number of newly jobless consumers looking to shed crushing debts.”
Reexamining the Reasons for April’s Declining Bankruptcy Rates
Last month, the overall rate of consumer bankruptcies showed a decline, with 30% fewer bankruptcies than recorded just a year prior. Yet the sharp decline in bankruptcies in April is not likely a result of a change in consumers’ need for debt relief. Rather, it is likely because many bankruptcy courts were closed at stay-home orders were issued as a result of the COVID-19 emergency, and consumers were focusing on more immediate issues of keeping their electricity on and paying for food and rent for their families.
According to Bob Lawless, a professor at the University of Illinois College of Law, the lower bankruptcy rate last month reflects the fact that “federal courts have largely closed and consumers usually file for bankruptcy after they have hit rock bottom, not in the middle of a crisis.” As Lawless further explained, “people are probably going to use consumer credit to smooth over the problems they have right now.” As many families rely on remaining available credit on credit cards, they are thinking that it “doesn’t make sense to file bankruptcy if you are just going to continue to pile up debts.” Instead, bankruptcy filings will likely come for many consumers when they have no other options.
Bankruptcy Courts Could be Overwhelmed by the Number of Consumer Bankruptcy Cases
As more Americans struggle with massive amounts of debt due to job loss and the coronavirus crisis over the coming months, it is likely that bankruptcy courts could become “overwhelmed by a record number of newly jobless consumers looking to shed crushing debts.” In April 2020 alone, more than 20 million Americans filed for unemployment benefits. What do those job loss numbers amount to when it comes to estimating the likely number of consumer bankruptcy cases to follow? Researchers suggest that “there could be 10 or more bankruptcy cases for each additional 1,000 job losses.”
To put those figures another way, out of the 20 million people who filed for unemployment benefits in April, about 200,000 statistically are likely to file for bankruptcy. As more Americans lose their jobs and file for unemployment benefits, those personal bankruptcy. In response to that information, many consumer protection advocates say that Congress needs to act—to make the bankruptcy process more accessible for more Americans, and to develop a solution so that the bankruptcy court system is not overwhelmed.
Contact a Bankruptcy Lawyer in Oak Park
If you have questions or need information about filing for consumer bankruptcy, one of the experienced Oak Park bankruptcy lawyers at our firm can assist you. Contact the Emerson Law Firm today.
See Related Blog Posts:
Chapter 13 Bankruptcy and the Coronavirus: What You Should Know
What is a Common Chapter 7 Bankruptcy Timeline?
Reexamining the Reasons for April’s Declining Bankruptcy Rates
Last month, the overall rate of consumer bankruptcies showed a decline, with 30% fewer bankruptcies than recorded just a year prior. Yet the sharp decline in bankruptcies in April is not likely a result of a change in consumers’ need for debt relief. Rather, it is likely because many bankruptcy courts were closed at stay-home orders were issued as a result of the COVID-19 emergency, and consumers were focusing on more immediate issues of keeping their electricity on and paying for food and rent for their families.
According to Bob Lawless, a professor at the University of Illinois College of Law, the lower bankruptcy rate last month reflects the fact that “federal courts have largely closed and consumers usually file for bankruptcy after they have hit rock bottom, not in the middle of a crisis.” As Lawless further explained, “people are probably going to use consumer credit to smooth over the problems they have right now.” As many families rely on remaining available credit on credit cards, they are thinking that it “doesn’t make sense to file bankruptcy if you are just going to continue to pile up debts.” Instead, bankruptcy filings will likely come for many consumers when they have no other options.
Bankruptcy Courts Could be Overwhelmed by the Number of Consumer Bankruptcy Cases
As more Americans struggle with massive amounts of debt due to job loss and the coronavirus crisis over the coming months, it is likely that bankruptcy courts could become “overwhelmed by a record number of newly jobless consumers looking to shed crushing debts.” In April 2020 alone, more than 20 million Americans filed for unemployment benefits. What do those job loss numbers amount to when it comes to estimating the likely number of consumer bankruptcy cases to follow? Researchers suggest that “there could be 10 or more bankruptcy cases for each additional 1,000 job losses.”
To put those figures another way, out of the 20 million people who filed for unemployment benefits in April, about 200,000 statistically are likely to file for bankruptcy. As more Americans lose their jobs and file for unemployment benefits, those personal bankruptcy. In response to that information, many consumer protection advocates say that Congress needs to act—to make the bankruptcy process more accessible for more Americans, and to develop a solution so that the bankruptcy court system is not overwhelmed.
Contact a Bankruptcy Lawyer in Oak Park
If you have questions or need information about filing for consumer bankruptcy, one of the experienced Oak Park bankruptcy lawyers at our firm can assist you. Contact the Emerson Law Firm today.
See Related Blog Posts:
Chapter 13 Bankruptcy and the Coronavirus: What You Should Know
What is a Common Chapter 7 Bankruptcy Timeline?
Comments
Post a Comment