We see the news every day. The parade of horribles: job losses, high unemployment, business closers, etc. And, with all of this grim economic news, it hardly a wonder that many of us believe that 2020 saw bankruptcies skyrocket. But, did that actually happen?
Unexpectedly, no. In fact, total bankruptcies across the nation were down in 2020 over 30% from 2016 and less than 30% from 2019, according to the Administrative Office of the United States Courts. Indeed, the only type of bankruptcy that showed any rise, were Chapter 11 business reorganization filings, which are normally only used by large businesses. They increased by 19.2% in 2020. In fact, 202 saw the lowest bankruptcy numbers since 1986 (530,438).
Last year saw over 200,000 less bankruptcies than at any point in the previous four years, which is also a departure from the usual bankruptcy cycle. Historically, bankruptcy rates reflect unemployment rates as the top reason for filing a consumer bankruptcy is job loss.
High unemployment did not lead to bankruptcy
Though, 2020 was obviously different as 2020 saw millions of people suddenly unemployed. The U.S. Bureau of Labor Statistics found that unemployment rates skyrocketed in 45 states from December 2019 to December 2020, even higher than unemployment rates during the Great Depression.
Have we avoided the worst of it?
Not likely. According to the Administrative Office of the United States Courts and several industry insiders, economic predictors, like unemployment numbers, sometimes have a lagging effect. For example, the bankruptcy numbers for the Great Recession during 2007 to 2009 did not hit their peak until 2010. Depending on any additional economic stimulus, this may also play out this year, especially in light that most federal courts closed for months and limited public access last year.
So, what does this all mean for Frankfort, Illinois, and Will County residents? It means that bankruptcy is an option for those that need it, but that the economic woes of 2020 may eventually spill over into 2021. This is why, for those facing the idea of bankruptcy, they should contact an attorney immediately.