Given the ongoing health crisis and the financial challenges many people in Maryland and across the nation are facing, there has been a long-held expectation that bankruptcy filings would skyrocket. According to the statistics, that has not happened. In fact, there has been a record reduction in bankruptcy filings. Still, people who have managed to make ends meet and avoid being overwhelmed by bills while facing a lack of income may not be able to maintain their current situation. Bankruptcy is a worthwhile alternative to clear debt or reorganize and continue operating a business.
Bankruptcy filings are down significantly
According to statistics from Epiq, January saw a 6% drop in bankruptcy filings when compared to December. There was a 44% decline in filings from January 2020. In total, there were just shy of 32,300 filings. This is the fewest in 15 years. The reduction of bankruptcies is surprising experts as it is happening while people are losing income and facing medical expenses because of the pandemic. Those two factors are frequently cited when people file for personal bankruptcy under Chapter 7 or Chapter 13. Declining sales and problems paying creditors often spark Chapter 11 reorganization filings.
It is believed that economic relief from the government has played a role in keeping people and businesses afloat. Still, experts think that there will be a flood of bankruptcies in the second half of the year. If the pandemic recedes and people slowly return to some semblance of normalcy, that will mean government relief may not be as readily available and bills will come due, leading people to take the necessary step in eliminating debt via bankruptcy.
Bankruptcy can be helpful for people facing financial challenges
Debtors are sometimes reluctant to file for bankruptcy due to negative perceptions about it or the fear that it will not help them. It can, however, be beneficial. Chapter 7 liquidation can clear unsecured debt and allow a person to keep certain properties. Chapter 13 is a payment plan that takes three or five years and lets a person retain a home, an automobile and more. For businesses, a Chapter 11 reorganization can keep a business going while a payment plan is formulated. To clear debt and get on stronger financial ground, bankruptcy could be useful. For assistance and information with filing a case, having legal advice from the start may be key.