Bankruptcies in the last year have decreased by nearly 30 percent according to a U.S. courts report. It follows a trend that began after March 2020 COVID-19 lockdowns.
“A steady decline in filings has continued since the coronavirus (COVID-19) crisis began,” the Administrative Office of U.S. Courts said in its report.
National business bankruptcy filings fell 28 percent, while non-business filings fell 30 percent, according to the report released on Nov. 8. It said that the decrease, measured between September 2020 and 2021, is due to COVID-19 related government aid, including eviction and foreclosure moratoriums, which have buoyed small and medium businesses up to this point.
The Eastern District of Missouri reported over 1,700 more bankruptcies than the Western District. St. Louis County in the Eastern District neared 2,000, the highest number of bankruptcies recorded this year in any Missouri county.
Rob Eggmann of Carmody MacDonald is a bankruptcy attorney. He said that bankruptcies for larger commercial businesses saw a large uptick in early 2020 after the pandemic, while bankruptcies filed by smaller and medium businesses that qualified for aid slowed.
Eggmann said that even with millions in debt, businesses and individuals often don’t file for bankruptcy until a major event such as a lawsuit occurs. For people who don’t live paycheck to paycheck but face considerable debt, receiving aid has allowed them to pay debts and save money. During lockdowns, money that would otherwise have been spent on travel, restaurants and extraneous spending was instead saved.
While moratoriums on evictions and foreclosures have been lifted, Eggmann agrees with the general consensus that a return to a normal amount of bankruptcies won’t occur until mid-2022. Internal business policies that are held over from the moratoriums in the last year will delay bankruptcy filings until then.
But Eggman said it won’t cause an exponential increase of bankruptcies, either.
“It won’t be a glut, just a return to normal defaults,” Eggmann said.
In 2020, St. Louis County alone recorded 2,395 bankruptcies, which is 1.5 times more bankruptcies than what Jackson County reported last year.
Overall in 2020, the Eastern District reported 8,031 bankruptcies, which at the time was 1.4 times more than the bankruptcies recorded in the Western District recorded. That gap between the number of bankruptcies in the Eastern and Western Districts has continued this year.