Even as the coronavirus pandemic battered the economy, forcing tens of millions of workers to file for unemployment and shuttering businesses large and small, a surprising trend emerged: The number of people filing for personal bankruptcy plunged, YahooFinance reported. In April, consumer bankruptcies dropped 47 percent from the same month last year, while May filings were down 43 percent year over year, according to the American Bankruptcy Institute. For the first half of the year, bankruptcies were 24 percent lower than the first six months of last year. Experts pointed to numerous factors for the slowdown. Courts and attorneys’ offices remained closed during state shutdowns. Evictions and foreclosures — often precursors to bankruptcy because people want to save their homes — were put on hold. Generous government support and forgiving creditors also kept many from falling into financial distress. Last, those on the brink of bankruptcy before the pandemic had more pressing issues to deal with. “People’s mental inboxes are full,” Professor Robert Lawless at the University of Illinois College of Law, who specializes in bankruptcy, consumer finance and business law, told Yahoo Money. “There are a lot of things to sort out in their lives — going to see a bankruptcy lawyer has been pushed further down on the to-do list for understandable reasons. I think that was a big part in the early days and weeks of the pandemic.” But the reprieve may be short-lived as the economy sputters, stopping and going as new COVID-19 outbreaks pop up, and as many of the temporary layoffs morph into permanent ones. “As government lifelines to help stabilize the economy begin to expire, bankruptcy provides a shield for households and companies facing intensifying financial distress,” ABI Executive Director Amy Quackenboss said in a statement earlier this week, announcing the half-year bankruptcy statistics. “We anticipate filings to begin increasing as a result.” Lawless’s past research on bankruptcies shows that people take time to choose bankruptcy, typically struggling through financial difficulties between two to five years before filing. Oftentimes, they are finally persuaded after a creditor sues them.
