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Personal and business bankruptcies in the U.S. are declining significantly, but that doesn’t mean that everything is financially sound in households or small businesses in Ohio or the nation, the Toledo Blade reported. “The Tsunami has not yet come. I think some thought it would be here already. The talk now is after the start of the year. If it’s going to come, it will come then,” said bankruptcy attorney Jon Liberman, a partner at the firm of Sottile & Barile, of Cleveland, and the co-chair of ABI’s Consumer Committee. The tidal wave of new bankruptcy filings that Lieberman speaks of, has been on the minds of many in the bankruptcy field due to the current recession caused by the coronavirus pandemic. “Credit card debt is back up there, medical bills are up there, and you have subprime auto loans again. The cost of living has gone up and wages have not, so obviously we’re all sitting back and waiting for the phones to start exploding again,” said bankruptcy attorney Gordon Barry, of the Toledo law firm of Barry & Feit. Since the pandemic began, bankruptcy filings have been trending downward. In August, filings in the U.S. Bankruptcy Court in Toledo, which covers 21 counties in northwest Ohio, totaled just 221 cases — a drop of 42 percent from a year ago and the sixth straight month this year that cases have fallen from 2019. According to ABI, there were 39,349 bankruptcies filed nationwide in August, which was a 41 percent decrease from August, 2019, when 66,530 cases were filed.

Maine bankruptcy filings were down 50 percent in August from a year earlier and have been down nearly every month since the pandemic began, but experts expect that trend to reverse in the near future, the Portland Press Herald reported. A combination of government financial support, banks’ willingness to defer loan and interest payments, and a moratorium on evictions and foreclosures have kept most consumers and businesses afloat and out of insolvency. But as aid runs out, courts reopen and banks call in loans, bankruptcy experts forecast more people and companies will seek relief from insurmountable debt in the months ahead. “Now that the money has been cut off, you are going to see things become more difficult for people,” said James Molleur, who has bankruptcy law offices in southern Maine. “People do not tend to file for bankruptcy when things are getting worse; they file when they hit bottom. I don’t think we’re there yet.” Maine consumer bankruptcies year to date were down 14 percent in July from 2019, according to the American Bankruptcy Institute. The per capita rate of bankruptcies in Maine was the third-lowest in the country, according to institute statistics. Nationwide, bankruptcy filings are down 25 percent compared with a year ago. The number of businesses filing for chapter 11 bankruptcy has ticked upward this year, aided by changes to federal law that make it easier for small employers to restructure to resolve debt, said Jeremy Fischer, an attorney with Drummond Woodsum in Portland. Maine lenders’ willingness to work with borrowers to defer or modify loan payments is a major reason few consumers and businesses entered bankruptcy proceedings so far this year, Fischer said. But that leniency will not last forever. “Lenders are responsible to their owners just like every other business,” he said. “At some point, you can’t defer payments on most of your loans or the bank will have trouble.” Maine’s relative success at curbing widespread virus outbreaks means businesses did not have to shut down again after being allowed to reopen this spring and early summer. But operating outdoors will become more challenging as late autumn and winter set in, putting extra stress on struggling small businesses, said Andrew Helman, co-chairman of the bankruptcy practice at Murray Plumb and Murray in Portland. If another federal economic stimulus package doesn’t emerge, Helman foresees more business closures and a cascade effect of lost rent payments and property values. “As government assistance dries up and commercial activity fails to return to the normal baseline before COVID-19, we will start to see impacts,” he said.

Commercial chapter 11 filings increased 17 percent in August 2020 from last year, according to data provided by Epiq Systems, Inc. The 526 commercial chapter 11 filings in August 2020 were up over the 450 filings registered in August 2019. All other filing categories registered decreases from last year. The 39,349 total U.S. bankruptcy filings for August 2020 represented a 41 percent decrease from the August 2019 total of 66,530 filings. The 36,877 consumer filings in August 2020 also represented a 42 percent decrease from last year’s consumer total of 63,132. Overall commercial filings in August 2020 totaled 2,472 filings, down 27 percent from the 3,398 filings in August 2019. 

The California legislature passed S.B. 832 to update its homestead exemption for consumer debtors. The law's major provisions include:

1) Making the homestead exemption the greater of $300,000 or the countywide median sale price of a single-family home in the calendar year prior to the year in which the judgement debtor claims the exemption, not to exceed $600,000

2) Adjusting annually for inflation, beginning on January 1, 2022, based on the change in the annual California Consumer Price Index for All Urban Consumers for the prior fiscal year, published by the Department of Industrial Relations.

"This homestead exemption increase is long overdue," said bankruptcy attorney Jenny Doling of J. Doling Law PC (Palm Desert, Calif.). "It represents the median priced home in California, not a home of great value, just the average family home. Further, if a debtor’s home is sold and the debtor is paid the value of the homestead, the debtor only has 6 months to roll the funds into a new homestead or the debtor loses those funds.” The previous California law prescribed that the amount of the homestead exemption was either $75,000, $100,000, or $175,000, depending on certain characteristics of the homestead’s residents. Having passed both the California Senate and Assembly, S.B. 832 is expected to be signed by Gov. Newsom soon and will go into effect immediately. Click here to read the bill text.