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






Comments

Post a Comment

Popular posts from this blog

Phantom Debt Collection Scams on the Rise in Illinois

Have you been contacted by a person claiming to be a debt collector who is seeking to recover a debt you allegedly owe? If so, you are not alone. According to a recent report from CBS Chicago , such parties claiming to be debt collectors are on the rise, and they are scamming Chicago-area residents. These alleged debt collectors are part of schemes known as “phantom debt collection scams,” since they involve the attempt to collect on a debt that the consumer does not actually owe. How can you avoid becoming a victim in a debt-collection scam ? What should you do if you have been targeted by a fake debt collector? How Do Phantom Debt Collection Scams Work? Now, you might be thinking to yourself: I would never agree to make payment on a debt that I did not owe. But the scam is not always that simple. Parties at the center of debt-collection scams often target consumers who do actually owe debts (to someone or to some entity), and they prey on the fact that these c...
Read more

Payday Lending and Predatory Lenders in Illinois

If you are in substantial debt in the Chicago area and are living in a paycheck-to-paycheck cycle, you may have taken out a payday loan to make ends meet. While payday lending is illegal in a number of states due to the predatory nature of these loans, it remains legal in Illinois. As a result, many debtors in the state have used payday lenders, and far too many of those borrowers cannot repay what they owe. According to a recent article from Progress Illinois , consumers have filed complaints about payday lenders in the state, illuminating a need for federal rules that address harmful lending practices . Predatory Payday Lenders and Protections for Consumers Due to the perceived predatory nature of payday loans, twelve states in the country have banned these lenders from operating completely, according to a fact sheet from loans.org . The states that currently have laws prohibiting payday lenders from operating include Arkansas, Arizona, Connecticut, Georgia, Mary...
Read more

New Information on Debts That Bankruptcy Cannot Discharge

If you are thinking about filing for bankruptcy in the Oak Park area, it is important to know that certain kinds of debts cannot be discharged in a bankruptcy case. Under U.S. bankruptcy law, these are known as non-dischargeable debts, or exceptions to discharge. There are certain types of debts that have long been identified clearly as non-dischargeable debts, while there are misconceptions about other types of debts that may or may not be dischargeable. As an article in CNBC discusses, the U.S. Supreme Court recently issued a ruling in the case of Bartenwerfer v. Buckley , which clarifies that debts incurred due to another party’s fraud cannot be discharged in an individual’s bankruptcy case. Our Oak Park bankruptcy attorneys can explain the Court’s recent ruling and provide you with additional information on dischargeable and non-dischargeable debts. Supreme Court Says Debt Incurred Due to Another’s Fraud is Non-Dischargeable The recent Bartenwerfer case involved a debtor attempti...
Read more