Coronavirus Pandemic Likely to Cause Consumer Bankruptcies

With jobless claims hitting a record-high in the United States as a result of the coronavirus pandemic, experts are anticipating that consumer bankruptcy filings are likely to increase significantly. As an article in The New York Times explains, the financial crisis of 2008 resulted in the loss of approximately 26 million job-loss claims beyond the average level of about 345,000. Now, with the coronavirus pandemic, the number of people without jobs could far exceed the rate of joblessness during the financial crisis. Further, job loss as a result of the coronavirus is happening at a much faster rate. As of April 2, 2020, jobless claims have reached a total of more than 6.6 million just since the previous week. To put that number in perspective, prior to this past week, the highest recorded number of unemployment filings in a single week was 695,000 in the year 1982.

As more Americans are without a paycheck and unable to make credit card payments or payments on medical bills, courts could see a sharp rise in consumers filing for bankruptcy, according to a recent article in MarketWatch.

Consumer Bankruptcy Filings Could Spike
According to the MarketWatch article, some consumers who have lost their jobs and already were considering bankruptcy have made the decision to file. With high rates of unemployment due to the coronavirus pandemic and rates of unemployment continuing to rise, the American Bankruptcy Institute anticipates that a “surge in May and June” of consumer bankruptcy filings will reflect those massive job losses. Depending upon the way in which the pandemic slows (or does not), the rise in consumer bankruptcy filings could continue in the months that follow.

As that article underscores, experts agree that, with certainty, consumer bankruptcy filings will increase in the coming months, yet the speed of the pandemic and the rate at which Americans are able to begin working again will shape when that rise in bankruptcies will happen.

One Credit Expert Recommends Consumers Stop Paying Down Their Debt
For Americans who are out of work, some credit experts are even recommending that they stop attempting to pay down any consumer debt they owe. According to a recent article in Yahoo! Finance, using any money saved or any income you are getting from unemployment benefits to pay down credit card or medical debt ultimately could cause your family more suffering in the future. That credit expert recommends that consumers spend their money “on essentials for survival,” including the stimulus check that they will receive from the federal government. As he clarified, it is likely that “income will drop significantly more than it already has, so” it is important to “prioritize protecting your family over protecting your credit score.” To be sure, the article underscores, “you can always rebuild your credit score.”

That article, similar to the MarketWatch piece, estimates that “the number of consumer bankruptcies in 2020 will skyrocket past the 2010 high of 1.5 million consumer bankruptcies.”

Contact a Consumer Bankruptcy Lawyer in Oak Park
If you have questions about filing for bankruptcy or other options that may be available to help you manage your debt, one of the experienced Oak Park consumer bankruptcy lawyers at our firm can assist you. Contact the Emerson Law Firm for more information.



See Related Blog Posts:

Can I File for Bankruptcy Again?

What Property Will I Be Able to Keep if I File for Bankruptcy?

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