With federal pandemic aid programs ending, many Americans are finding themselves in difficult financial situations. Rising interest rates and high inflation make these situations all that much worse. As a result, bankruptcy courts are now seeing a spike in bankruptcy filings.
According to data from Epiq, the total number of bankruptcy filings increased in January 2023 by 19 percent, to 31,087 filings from one year ago. Additionally, the number of American consumers who filed for bankruptcy in Chapters 7, 11, and 13 increased by 20 percent from one year ago.
Individual bankruptcies are not the only type on the rise. Many companies have been forced to file for bankruptcy due to several factors, including difficulty hiring in a tight labor market and fears of an impending recession. However, even though these types of bankruptcies have increased, Epiq notes that they still have not reached pre-pandemic levels.
According to a New York Times estimate, the federal government issued approximately $817 billion in stimulus payments to American consumers starting in March 2020. These payments ended one year later in March 2021. Additionally, Congress paid out nearly $800 billion in in Paycheck Protection loans to small and large businesses before the program ended in May 2021.
These programs kept individuals and companies afloat for a year and a half, but once the programs ended and the funds ran dry, reality quickly set in. As a result, many businesses who were just getting by during COVID are now realizing their business will not be able to survive and are filing for bankruptcy. Along those same lines, individuals who were able to pay for their expenses using stimulus funds are now no longer able to pay for those basic expenses. The result is many of them are resorting to bankruptcy to get a fresh financial start.
Bankruptcy numbers are increasing, but they are still below pre-pandemic levels. That being said, if the U.S. enters a recession, these numbers will likely rise. Numbers will be expected to increase particularly in Chapter 7 bankruptcies, especially if companies are forced to downsize in a potential recession.
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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.