Pandemic……and record DECLINE IN BANKRUPTCY filings. Yes, as the title of an article in the Wall Street Journal in January read about 2020 “Commercial Chapter 11 Filings Rose 29%, While Personal Bankruptcies Dived.” We debt relief/restructure practitioners have been following these numbers since the beginning of the Pandemic.
From the end of March 2020 on, many were expecting a flood, better-yet a monsoon of bankruptcy filings, but the flood never came. Instead, we have seen the lowest number of filings in 35 years! What is going on? Well, the short answer is that the stimulus packages worked at some level in keeping people employed and many business muddling along! Also, the closing of the courts, delays in foreclosures, almost automatic moratoria for mortgagors, abatements of rent and hold on evictions many posit have slowed the process. So, what is in store for 2021? I tend to lean, with hope, that with the funds coming into the economy through additional PPP funds, extensions of unemployment, extra dollars for individuals and business, perhaps business will reopen, begin getting all those on unemployment back to work and truly bring everyone into the economy without businesses and individuals being compelled by their circumstances to file bankruptcy. Additionally, the federal government will need to do everything right to ensure that inflation does not “kick in.” However, I fear that we may now be seeing the beginning of what will eventually be a wave of bankruptcy filings, not necessarily a title wave, but a wave nonetheless. I can just tell you this anecdotally. As a bankruptcy trustee, I am assigned 45-50 cases approximately once a month to handle. Those numbers went way down during the last eight months. My January hearings were again up to those numbers with many articulating the COVID-19 pandemic as the cause. Earlier this month, the Atlantic City Press reported “the Atlantic City-Hammonton metro area, which basically encompasses all of Atlantic County, has been in the top three metro areas in the nation for unemployment rates and increases in unemployment during the pandemic. The other two topping that list were other big tourism and/or gaming sites: The greater Las Vegas area and Kahului-Wiluku-Lahaina in Hawaii.” From a business perspective, we have been working very hard to make deals with landlords or for landlords and many other creditors that are either in trouble or causing trouble. However, some of those attempts are blowing up as certain industries are not even able to pay their bills at reduced amounts and creditors are unwilling to take further cuts as their obligations to their own creditors are just too great.
Stay tuned. I will be putting out a post once a month or perhaps more often, to keep you informed on current filings and the beginning of a uptick that we most certainly think will occur.
Questions? Let Doug know.
Douglas S. Stanger is a shareholder at Flaster Greenberg PC concentrating his practice in bankruptcy, corporate and real estate law. He has served on the United States Department of Justice Panel of Bankruptcy Trustees for 25 years and is an approved mediator for the Bankruptcy Court in the states of New Jersey, Pennsylvania and Delaware. Most recently, Doug was appointed by the U.S. Department of Justice as one of only ten subchapter V trustees in the State of New Jersey.