%1

The pandemic-induced recession has pushed more Americans to file for personal bankruptcy, particularly Black women, according to a report by nonprofit bankruptcy startup Upsolve, Yahoo Finance reported. The report came from a bankruptcy questionnaire of 17,000 low-income users over the past year and found that COVID-19 has pushed many to seek bankruptcy protection. "Upsolve is exactly right... Black people are overrepresented in bankruptcy and also Black women are especially overrepresented in bankruptcy," said Prof. Robert Lawless of the University of Illinois College of Law. Upsolve, which helps users file paperwork and applications for chapter 7 bankruptcy, noted a particularly sharp increase among Black users who cited the coronavirus as their reason for filing for chapter 7 bankruptcy. “It makes sense that more people are saying COVID-19 is their main reason for filing, but that number has increased for Black women at a higher rate than white women,” said Rohan Pavuluri, co-founder and CEO of Upsolve. "Those are jarring statistics." The company stressed that users generally file for bankruptcy only after exhausting all other options — including cutting back on necessities, selling or pawning possessions, and avoiding necessary medical care.

President Joe Biden on Saturday signed the “COVID-19 Bankruptcy Relief Extension Act” into law to extend provisions providing financially distressed consumers and small businesses greater access to bankruptcy relief. The legislation will extend personal and small business bankruptcy relief provisions that were part of last year's CARES Act through March 27, 2022. Some of the key provisions of last year's relief packages were the increased debt limit to $7.5 million for small business debtors electing to file under subchapter V and allowing individuals to seek COVID-19–related hardship modifications, among other changes. With the CARES Act bankruptcy provisions originally due to sunset on March 27, the House of Representatives on Friday afternoon passed the Senate-amended version of H.R. 1651, the “COVID-19 Bankruptcy Relief Extension Act of 2021,” which passed by unanimous consent in the Senate on Wednesday. The Senate struck a provision from the original bill that would have extended the bankruptcy provisions of December's “Consolidated Appropriations Act of 2021” (CAA) that are due to sunset on December 27.

The number of people seeking bankruptcy during the pandemic fell sharply last year as government aid propped up income and staved off housing and student-loan obligations, the <em>Wall Street Journal</em> reported. Bankruptcy filings by consumers under chapter 7 were down 22% last year compared with 2019, while individual filings under chapter 13 fell 46%, according to Epiq data. After holding above 50,000 filings a month in 2019 and in the first quarter of 2020, bankruptcy filings have remained below 40,000 a month since last March when the pandemic hit. By contrast, commercial bankruptcy filings rose 29%, with more than 7,100 businesses seeking chapter 11 protection last year, according to Epiq. The downward trend in personal bankruptcies bucks predictions by analysts and economists that disruptions from COVID-19 lockdowns and restrictions early in the pandemic would lead to a sharp increase in filings. Economists and bankruptcy lawyers say federal suspensions of evictions, home foreclosures and student-loan obligations have helped limit bankruptcies — though they worry bankruptcy rates could go up after aid ends. Household spending also dropped as people stayed home, canceled travel and socially distanced to avoid the coronavirus. Several rounds of government aid padded incomes with direct payments to households and enhanced unemployment benefits. The personal saving rate rose. Economists say the government measures could only temporarily lower the bankruptcy rate. Some expect filings to pick up later this year or next, as temporary relief expires and financial bills incurred during the pandemic come due.

The House of Representatives this afternoon passed the Senate-amended version of H.R. 1651, the “COVID-19 Bankruptcy Relief Extension Act of 2021.” The legislation will extend personal and small business bankruptcy relief provisions that were part of last year's CARES Act through March 2022. Some of the key provisions of last year's relief packages were the increased debt limit to $7.5 million for small business debtors electing to file under subchapter V and allowing individuals to seek COVID-19–related hardship modifications, among other changes. The legislation was amended and passed unanimous consent by the Senate on Wednesday night to only include the CARES Act bankruptcy provisions. The amendment struck section 2(c) from the bill, which was the section extending the bankruptcy provisions of December's “Consolidated Appropriations Act of 2021” (CAA) that are due to sunset on December 27. While the COVID-19 Bankruptcy Relief Extension Act originally proposed the CAA provisions to expire at the same time as the CARES bankruptcy provisions on March 27, 2022, the amendment means that the CAA provisions will still expire in eight months. H.R. 1651 now heads to President Biden’s desk for signature.

Senate Judiciary Chair Dick Durbin (D-Ill.) and Ranking Member Chuck Grassley (R-Iowa) introduced S. 473 on February 25 to extend the bankruptcy provision sunsets, and House Judiciary Committee Chairman Jerry Nadler, D-N.Y., introduced H.R. 1651, the House companion, on March 8. ABI on March 5 sent a letter to Senate Judiciary Committee leadership supporting S. 473, the "COVID-19 Bankruptcy Relief Extension Act," to extend, for another year, bankruptcy-relief provisions due to sunset in the 2020 CARES Act and December 2020 omnibus appropriations bill. “There is no doubt that the COVID-19 pandemic and its aftermath will continue to put significant strain on U.S. small businesses in the near future and perhaps for years to come,” ABI Executive Director Amy Quackenboss wrote in the letter to Sens. Durbin and Grassley. “By extending the increased debt limit of the SBRA, the COVID-19 Bankruptcy Relief Extension Act offers much-needed relief to a growing number of U.S. small businesses who find themselves in need of reorganizing in order to stay in business.” Click here to read ABI’s letter.