Drop in Chapter 7 and 13 Bankruptcy Filings, But Shouldn’t It Have Gone Up Because of the Pandemic?
Hello readers! If you’ve been reading my bankruptcy posts, you probably know enough by now as to which type of bankruptcy you need to file and what to do if you’re ready to proceed. You might be wondering how many people out there are in a similar situation, considering to file for bankruptcy these days. Interestingly, the number of new bankruptcy filings in the Bankruptcy Court for the Eastern District of Virginia has dropped about 60% during the past year. That may be the opposite of what you had in mind. Most people think that bankruptcy filings must have increased with the COVID-19 pandemic, since many people lost their jobs or had loss of income making it harder to pay their bills. However, contrary to popular belief, there have been less filings despite the decrease in money in the average household.
How is that possible? Well, take a look at yourself. In these uncertain times, I bet most of you have cut back on spending. Maybe you cancelled your gym membership or began cooking more meals at home or cut off media subscriptions such as Netflix. I know my family has reduced spending significantly by eating out less and getting rid of cable TV. With less income during the pandemic, many people realized that they can do without all the things we thought we needed. Another thing people are doing is using credit cards that still have some money to use. Also, there is a moratorium (a pause) that prevents people from being evicted, which I’m sure many people are finding to be helpful during these difficult times. With these pandemic regulations in place and by lowering spending in some areas, many households are able to get by without having to file for bankruptcy even with loss of income. It also has to do with that negative stigma that I mentioned in my previous post where people commonly think filing for bankruptcy is a bad thing to do and many are ashamed of filing.
Whatever the reasons may be, numbers are definitely showing a decrease in bankruptcy filings. I attend virtual CLE (continuing legal education) classes where I’ve heard directly from court representatives and bankruptcy judges that there are significantly less filings. However, everyone who lowered their spending or modified their lifestyles knows that certain changes can’t be forever. Good news may be coming soon, especially since the many COVID-19 restrictions are being lifted by the government, the vaccines are in full rollout, and job opportunities are increasing. But time catches up. If you’re even thinking about possibly filing, being prepared by speaking with a bankruptcy lawyer will put you in a prime position when the time comes.
As always, a consultation is free. Give me a call.