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Annual Bankruptcy Filings Decline in 2020—Will We See a Surge in 2021 and Beyond?

Wed 3rd Feb 2021, Blog

Despite high rates of unemployment and on-again-off-again business closures due to the pandemic, total annual bankruptcy filings in 2020 fell 29.7 percent over year prior, according to a report[1] released last Thursday by the Administrative Office of the U.S. Courts. Only one category—Chapter 11 filings including 7,561 involving businesses—saw an increase of 19.2 percent.

An influx in bankruptcies may only be delayed, however. As noted in the report, an increase in filings following the Great Recession of 2007 did not peak until 2010. Limited access to courts may also have contributed to a delay in filings in 2020 as many courts have closed to the public due to Covid-19. Repayment of pandemic relief loans and the expiration of mortgage deferments may also contribute to a spike in filings in the next few years.

“This really does appear to be the calm before the storm,” said Bienert Katzman Littrell Williams LLP partner Tony Bisconti, who specializes in bankruptcy, complex civil litigation, and white-collar criminal defense. “Relief aid and PPP loans have allowed many struggling individuals and businesses to delay seeking bankruptcy protection during the downturn, but those facing financial distress will have to begin seriously considering their restructuring or liquidation options as those resources begin to dry up. Even if more relief is on the horizon, it may only serve as a band-aid for some individuals or firms, who may opt for the bankruptcy route to address deeper-seeded financial issues they may be facing to try for a ‘fresh start’ as we slowly begin to come out of pandemic and re-open for business.”

BKLW attorneys combine their courtroom experience and in-depth familiarity with the law to aggressively pursue their clients’ interests.  Our understanding of how bankruptcy issues affect day-to-day business operations allows us to counsel our clients on practical ways to achieve their goals, which may include creative and practical out-of-court workouts.  We are well known for our litigation capabilities, which usually motivate our adversaries to negotiate and consider efficient consensual resolutions.  From advising to negotiating to litigating, we know how to achieve successful results under often expedited time pressures.

TOTAL BANKRUPTCY FILINGS BY CHAPTER,
YEARS ENDING
DECEMBER 31, 2016-2020

Year

Chapter

 

7

11

12

13

2020

381,217

8,113

552

154,341

2019

483,988

6,808

595

283,413

2018

475,575

7,095

498

290,146

2017

486,347

7,442

501

294,637

2016

490,365

7,292

461

296,655

Table 1 courtesy of the Administrative Office of the U.S. Courts

[1] “Annual Bankruptcy Filing Fall 29.7 Percent.” United States Courts, 28 Jan. 2021, www.uscourts.gov/news/2021/01/28/annual-bankruptcy-filings-fall-297-percent.