How COVID Has Changed Consumer Bankruptcy
For nearly 18 months, consumers across the country (and across the globe) have been struggling with the physical and economic ramifications of the COVID-19 pandemic. Early on in the pandemic, many commentators expected to see personal bankruptcy rates rising, with increased Chapter 7 bankruptcy and Chapter 13 bankruptcy filings. Yet those predictions largely have not come to fruition, at least not yet. A recent article from the American Bar Association discusses what bankruptcy shifts have occurred in the age of COVID-19, and what could change in the near future. Our Oak Park bankruptcy attorneys want to go over some of those issues with you to give you a sense of where we are when it comes to consumer bankruptcy filings, and where we could be going.
Chapter 7 and Chapter 13 Bankruptcy Cases Have Not Surged
One key thing to know about bankruptcy in the era of COVID-19 is expectations that we would see a sharp rise in consumer bankruptcy filings has not occurred. Indeed, as the article points out, the total number of consumer bankruptcy filings in 2020 was 544,463, which is actually significantly lower than the consumer bankruptcy filing numbers in previous years. To be sure, that number represents “approximately 230,000 fewer filings than in either 2018 or 2019.”
There are a number of possible reasons for the low rate of consumer bankruptcy filings, including the foreclosure and eviction moratoriums that will not continue to protect debtors into 2021 and afterward, stimulus checks, and unemployment benefits. If those reasons are central to the lower bankruptcy filing rates, it is certainly possible that the numbers for 2021, and especially for 2022, will look significantly different.
Yet you might be thinking: I have seen headlines reporting rising bankruptcy rates. Although consumer bankruptcy filings (Chapter 7 and Chapter 13) declined, the overall rate of Chapter 11 bankruptcy filings increased. While there are certain situations in which a consumer might file for Chapter 11 bankruptcy, this type of bankruptcy filing is usually limited to businesses. In 2020, Chapter 11 bankruptcy filings increased by more than 8,000 cases from the previous year.
Potential Changes to Consumer Bankruptcy Laws in the Future
Another key thing to know about bankruptcy during the pandemic is that bankruptcy law could change radically in the near future. Due in part to the recognition of struggling consumers during the pandemic, Senator Elizabeth Warren and Representative Jerrold Nadler introduced legislation that could overhaul the current consumer bankruptcy system. That legislation is the Consumer Bankruptcy Reform Act of 2020, and if passed, it would get rid of both Chapter 7 and Chapter 13 bankruptcy options and replace them with a single Chapter 10 bankruptcy option.
The costs of filing for bankruptcy would be lower for debtors, and the process of seeking bankruptcy protection would become streamlined. Moreover, Chapter 10 bankruptcy would make it significantly easier to have student loan debt discharged in bankruptcy.
Contact a Bankruptcy Lawyer in Oak Park
If you have questions about filing for consumer bankruptcy or concerns about how the pandemic might have altered your situation, one of our Oak Park consumer bankruptcy lawyers can help. Contact the Emerson Law Firm for more information.
See Related Blog Posts:
Five Things to Know About Liquidation Bankruptcy
Common Kinds of Debt That Are Dischargeable in Consumer Bankruptcy
Chapter 7 and Chapter 13 Bankruptcy Cases Have Not Surged
One key thing to know about bankruptcy in the era of COVID-19 is expectations that we would see a sharp rise in consumer bankruptcy filings has not occurred. Indeed, as the article points out, the total number of consumer bankruptcy filings in 2020 was 544,463, which is actually significantly lower than the consumer bankruptcy filing numbers in previous years. To be sure, that number represents “approximately 230,000 fewer filings than in either 2018 or 2019.”
There are a number of possible reasons for the low rate of consumer bankruptcy filings, including the foreclosure and eviction moratoriums that will not continue to protect debtors into 2021 and afterward, stimulus checks, and unemployment benefits. If those reasons are central to the lower bankruptcy filing rates, it is certainly possible that the numbers for 2021, and especially for 2022, will look significantly different.
Yet you might be thinking: I have seen headlines reporting rising bankruptcy rates. Although consumer bankruptcy filings (Chapter 7 and Chapter 13) declined, the overall rate of Chapter 11 bankruptcy filings increased. While there are certain situations in which a consumer might file for Chapter 11 bankruptcy, this type of bankruptcy filing is usually limited to businesses. In 2020, Chapter 11 bankruptcy filings increased by more than 8,000 cases from the previous year.
Potential Changes to Consumer Bankruptcy Laws in the Future
Another key thing to know about bankruptcy during the pandemic is that bankruptcy law could change radically in the near future. Due in part to the recognition of struggling consumers during the pandemic, Senator Elizabeth Warren and Representative Jerrold Nadler introduced legislation that could overhaul the current consumer bankruptcy system. That legislation is the Consumer Bankruptcy Reform Act of 2020, and if passed, it would get rid of both Chapter 7 and Chapter 13 bankruptcy options and replace them with a single Chapter 10 bankruptcy option.
The costs of filing for bankruptcy would be lower for debtors, and the process of seeking bankruptcy protection would become streamlined. Moreover, Chapter 10 bankruptcy would make it significantly easier to have student loan debt discharged in bankruptcy.
Contact a Bankruptcy Lawyer in Oak Park
If you have questions about filing for consumer bankruptcy or concerns about how the pandemic might have altered your situation, one of our Oak Park consumer bankruptcy lawyers can help. Contact the Emerson Law Firm for more information.
See Related Blog Posts:
Five Things to Know About Liquidation Bankruptcy
Common Kinds of Debt That Are Dischargeable in Consumer Bankruptcy
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