The number of individuals and businesses seeking bankruptcy protection increased last month, while the coronavirus (COVID-19) pandemic continues. Financial experts have predicted this jump for months since states began to shut down in mid-March.
According to the legal-services firm, Epiq Systems Inc., the number of businesses that have filed for Chapter 11 bankruptcy increased by 52 percent when compared to July 2019. Additionally, the number of personal bankruptcy cases have gone up. The number of personal bankruptcy filings are expected to increase, when the Covid-19 economic stimulus relief is cut or reduced.
The stimulus bill passed at the start of the crisis has helped offset bankruptcy for some, but now that the money received through that package is likely gone, both businesses and individuals are struggling to stay afloat financially.
Epiq has reported that 642 businesses filed for Chapter 11 bankruptcy in July 2020. During the first seven months of 2020, the number of Chapter 11 cases filed increased by 30 percent when compared to 2019. This increase is a direct result of debt businesses were dealing with before the crisis hit and the fact that most of the businesses were forced to close during the height of the crisis. Even though many are now reopened, they are still operating at a lower capacity with fewer customers, due to the fact that many people are hesitant to venture out into society again as the COVID-19 crisis continues.
Many big-name companies are on this list of businesses filing for Chapter 11 bankruptcy in July, including Brooks Brothers Group Inc., Ann Taylor’s Ascena Retail Group Inc., California Pizza Kitchen, California Resources Corp., and Remington Outdoor Co. The fact that a business has filed for Chapter 11 does not necessarily mean that business intends to close. Quite the opposite, this form of bankruptcy offers an avenue to restructure debt and rebuild to a point where the business can function in the economy. While many businesses have decided to make the decision to close completely, others are choosing to continue under the protection of a Chapter 11 bankruptcy case.
Consumers are also seeking the protection offered under both Chapter 7 and Chapter 13 bankruptcies. It has been reported that 40,000 personal bankruptcy filings were made in July 2020, which is an 11 percent increase from April 2020. These numbers are expected to continue to go on an upward trend throughout the second half of 2020.
While the number of personal bankruptcy filings have gone up, interestingly enough, the number of Chapter 13 filings have gone down. This form of bankruptcy is known as a reorganization bankruptcy where the filer works with the bankruptcy trustee to prepare a repayment plan that lasts anywhere between three to five years. Chapter 13 filings fell 57 percent when compared to July 2019. However, the courts anticipate that the number of personal bankruptcy filings will increase drastically now that the $600 per week unemployment stipend ended at the end of July. Additionally, as the mortgage forbearance programs and moratoriums on evictions are lifted, these actions will also likely lead to an increase. Lawmakers are currently in negotiations to extend this aid.
Consumers who are struggling with debt are encouraged to work directly with the creditor on an agreement or repayment plan, but if that is not possible, consumers should consult with a bankruptcy attorney to discuss their options.
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If you have questions on this topic or are in financial crisis and considering filing for bankruptcy, contact an experienced Miami bankruptcy attorney who can advise you of all of your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade Garcia McMaken has been helping people from all walks of life build a better tomorrow. Our attorneys’ help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade Garcia McMaken website at www.miamibankruptcy.com.