Despite COVID-19’s enormous impact on the economy, most types of consumer and business bankruptcy filings have decreased. Bankruptcies in 2021 have fallen, compared to rates for the same months in 2020. Learn more about bankruptcy rates in 2020 v. 2021.
Bankruptcy Rates in 2020
Bankruptcy rates in 2020 fell 29.7 percent for the year, compared to the rates by the end of 2019, according to the Administrative Office of the U.S. Courts. Bankruptcy filings for 2019 equaled 774,940. In 2020, this number dropped to 544,463, which represented the lowest rate of consumer filings since 1986.
However, commercial chapter 11 bankruptcies saw an increase in filings. In 2019, 7,020 cases were filed. In 2020, this number jumped to 8,333. Of those, 7,786 involved business reorganizations.
Bankruptcy Rates in 2021
Compared to last year, consumer and business bankruptcy rates fell more than 40 percent in January 2021, the American Bankruptcy Institute recently reported. In January 2021, consumer filings totaled 30,263, compared to 54,600 in January 2020, a 45 percent decrease. Similarly, business bankruptcy filings totaled 2,035 in January 2021, compared to 3,560 cases filed in January 2020, a 43 percent decline. Even chapter 11 filings have decreased in 2021 with 479 cases filed in January 2021, compared to 631 such filings in January 2020.
The total number of bankruptcy filings fell by 6 percent from December 2020 to January 2021. Noncommercial filings similarly decreased by 6 percent from December 2020 with 32,144 filings to January 2021. However, commercial chapter 11 filings increased from December 2020 with 394 filings to January 2021 with 479 filings, a significant 22 percent increase.
Bankruptcy experts attribute the decreased number of bankruptcy filings to continued government relief programs, debtor moratoriums, and debt deferments. However, higher unemployment rates and larger debt loads are leaving many individuals and businesses vulnerable.
Small Business Reorganization Act
The Small Business Reorganization Act allows small businesses a more streamlined path to restructuring their debts. Lawmakers increased the eligibility limit for small businesses from $2,725,625 of debt to $7.5 million as part of the CARES Act due to the pandemic. They then passed the Bankruptcy Relief Extension Act of 2021 to maintain this higher eligibility limit. However, this extension only lasts until March 27, 2022, so businesses have a limited time to file under the higher threshold.
Need Bankruptcy Assistance? Contact Erin Shank Today
If you need bankruptcy assistance, Erin B. Shank, Attorney at Law can help. Attorney Shank can guide you through the bankruptcy process from start to finish without any in-person meetings.
If you are filing under the Small Business Reorganization Act, your time may be limited, so do not delay in reaching out for experienced legal help. Attorney Shank assists with both consumer and commercial filings and can help you obtain bankruptcy relief. Get started now with a free virtual consultation.