Risk of Consumer Bankruptcy When Federal Benefits End?
Earlier in the start of the pandemic, consumer protection advocates began discussing the risks of looming personal bankruptcy filings. As thousands, then hundreds of thousands, and ultimately millions of people lost their jobs due to the COVID-19 pandemic, more commentators discussed the increased risks of a wave of consumer bankruptcy filings. In large part, that wave has not come, but according to a recent article in The New York Times, the presence of federal aid may have something to do with the limited number of bankruptcy filings thus far in the pandemic. However, if Congress does not expand certain federal benefits for an extended period of time, the article suggests, then we could soon see a sharp rise in Chapter 7 bankruptcy filings in Chicago and across the country.
Bankruptcy Filings Declined Despite “Soaring” Unemployment
Much of the U.S. entered into state-based stay-at-home orders in March, and non-essential businesses closed. As a result, millions of people ultimately lost their jobs—more than 36 million in just a couple of months—and many of those businesses ultimately went out of business. As a result, workers at those businesses have remained unemployed, unable to find new positions in a new pandemic “normal.” Even for workers who were furloughed, many have experienced cut hours as a result of limitations on reopening, while other workers have become infected with COVID-19 and, as such, have been unable to work.
Yet despite all of those issues, bankruptcy filings have actually declined since March. The drop in bankruptcy filings is significant. According to a bankruptcy trustee cited in the article, consumer bankruptcy filings have dropped from about 350 to 400 cases per trustee per month to just over 100 per month. The American Bankruptcy Institute (ABI) reports that personal bankruptcy filings have not been this low “in 15 years.” What is going on? The article attributes the “soaring” unemployment yet drop in bankruptcy filings to the “federal government’s stimulus package.” Many unemployed Americans have been able to use unemployment pay and stimulus money to pay bills and even, in some cases, to “pay down existing debt.” For many unemployed workers who would have only received approximately $340 per week in unemployment pay, the stimulus package provided $600 per week.
However, those benefits are set to expire very soon. After July, unemployed workers will no longer be eligible for those federal unemployment benefits unless Congress takes action and passes another stimulus package. Accordingly, we are likely to see a substantial increase in consumer bankruptcy filings.
Learn More From an Oak Park Bankruptcy Lawyer
Without another stimulus package from Congress, any money that a large number of people were able to save through the federal unemployment benefits are likely to disappear quickly, and those individuals will be struggling with debt. By May of this year, in about 40% of all American households earning less than $40,000 per year, at least one earner had lost his or her job. As the coronavirus continues to surge in various parts of the country, more unemployment could be on the horizon.
If you need help with a bankruptcy case, you should seek advice from an Oak Park bankruptcy attorney for assistance. Contact the Emerson Law Firm for more information.
See Related Blog Posts:
Consumer Bankruptcy FAQs
Benefits of Filing for Bankruptcy
Bankruptcy Filings Declined Despite “Soaring” Unemployment
Much of the U.S. entered into state-based stay-at-home orders in March, and non-essential businesses closed. As a result, millions of people ultimately lost their jobs—more than 36 million in just a couple of months—and many of those businesses ultimately went out of business. As a result, workers at those businesses have remained unemployed, unable to find new positions in a new pandemic “normal.” Even for workers who were furloughed, many have experienced cut hours as a result of limitations on reopening, while other workers have become infected with COVID-19 and, as such, have been unable to work.
Yet despite all of those issues, bankruptcy filings have actually declined since March. The drop in bankruptcy filings is significant. According to a bankruptcy trustee cited in the article, consumer bankruptcy filings have dropped from about 350 to 400 cases per trustee per month to just over 100 per month. The American Bankruptcy Institute (ABI) reports that personal bankruptcy filings have not been this low “in 15 years.” What is going on? The article attributes the “soaring” unemployment yet drop in bankruptcy filings to the “federal government’s stimulus package.” Many unemployed Americans have been able to use unemployment pay and stimulus money to pay bills and even, in some cases, to “pay down existing debt.” For many unemployed workers who would have only received approximately $340 per week in unemployment pay, the stimulus package provided $600 per week.
However, those benefits are set to expire very soon. After July, unemployed workers will no longer be eligible for those federal unemployment benefits unless Congress takes action and passes another stimulus package. Accordingly, we are likely to see a substantial increase in consumer bankruptcy filings.
Learn More From an Oak Park Bankruptcy Lawyer
Without another stimulus package from Congress, any money that a large number of people were able to save through the federal unemployment benefits are likely to disappear quickly, and those individuals will be struggling with debt. By May of this year, in about 40% of all American households earning less than $40,000 per year, at least one earner had lost his or her job. As the coronavirus continues to surge in various parts of the country, more unemployment could be on the horizon.
If you need help with a bankruptcy case, you should seek advice from an Oak Park bankruptcy attorney for assistance. Contact the Emerson Law Firm for more information.
See Related Blog Posts:
Consumer Bankruptcy FAQs
Benefits of Filing for Bankruptcy
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