Many people assumed that the financial downturn caused by the COVID-19 pandemic would force a lot of people into bankruptcy. However, statistics released by the Administrative Office of the U.S. Courts show a significant drop in the number of people filing for bankruptcy in 2020 compared to 2019.
Annual bankruptcy filings in calendar year 2020 totaled 544,463, compared with 774,940 cases in 2019. That is a decrease of 29.7%, and it is the fewest bankruptcies filed in one year since 1986.
The decrease could be due to the fact that the courts were pretty much closed down at the beginning of the pandemic. Stimulus payments and increased unemployment benefits may also have played a role by helping people keep their heads above water. Or it could be that we are not seeing the full impact of the economic downturn just yet. According to the press release accompanying the 2020 bankruptcy statistics, bankruptcy filings did not peak until 2010 following the 2007 economic crisis.
Across the country, there was only one category of bankruptcy that increased in 2020 — Chapter 11 reorganizations. Chapter 11 reorganizations rose 18.7%, from 7,020 in 2019 to 8,333 in 2020. These types of bankruptcies are typically filed by businesses. Most people file for personal bankruptcy under Chapter 7 or Chapter 13.
The Washington Post took a closer look at the increase in Chapter 11 business bankruptcies to see what types of businesses were hit hardest:
Data on a subset of businesses ― those registered as corporations ― shows that some sectors are faring much worse than others, with restaurants, retailers, entertainment companies, real estate firms and oil and gas ventures filing for protection in far greater numbers than in previous years, according to New Generation Research.
“Bankruptcies filed by entertainment companies in 2020 nearly quadrupled, and filings nearly tripled for oil and gas companies, doubled for computer and software companies and were up 50 percent or more for restaurant owners, real estate companies and retailers, compared with 2019, data from the research firm shows.
“Other sectors have so far not fared as badly as one might expect, as only 77 hotel or gaming companies filed for protection in 2020, down from 92 in 2019 ― a year when the tourism industry thrived.
“All of these industries are important to Alabama, so business bankruptcy statistics are something the Padgett & Robertson team will be keeping an eye on even though we mostly work with people filing for personal bankruptcy.”
Speaking of statistics, the data from the U.S. Courts are broken down on a county by county level. You can see in the chart here that Mobile and Baldwin counties have some of the highest bankruptcy numbers in the state.
No matter what the statistics say is happening to other people, if you are struggling to make ends meet, you need an attorney that can help you find the right path forward. The Padgett & Robertson team would be honored to serve in that role for you. Please contact us today to schedule an initial consultation.