US Bankruptcy filings drop 30% in 2020 as govt stimulus supports distressed business, individuals

Total US bankruptcy filings in 2020 dropped 30% as the government and lenders offered stabilization measures in response to the economic challenges resulting from the COVID-19 pandemic. This 30% drop in US bankruptcy filings in 2020 is the second-largest percentage decrease since the 70% drop in filings recorded in 2005-06. That decrease was the result of the implementation of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, which prompted total bankruptcies to rise to 2,078,415 ahead of its enactment then fall to 617,660 total filings in 2006.

According to data provided by Epiq, total filings fell from 757,634 in 2019 to 529,071 filings in 2020. Annual US bankruptcy filings last registered a similar total in 1986, when total filings were 530,438.

Total consumer filings were 496,565 nationwide in 2020, 31% fewer than the 718,584 total filings during 2019. The 2020 consumer filing total is the lowest since the 495,553 filings registered in 1987. Chapter 13 filings decreased 46% to 152,828 in 2020, down from the 282,712 filings in 2019. Commercial filings also declined, as the 32,506 business filings in 2020 represented a 17% drop from the 39,050 recorded in calendar year 2019.

Commercial chapter 11 filings, however, increased 29% during calendar year 2020 as the total of 7,128 climbed past the 5,519 recorded during calendar year 2019. The 2020 commercial chapter 11 filing total was the highest total since the 7,789 filings registered in 2012.

“Continued government relief programs, moratoriums and lender deferments have helped families and businesses weather the economic challenges over the past year resulting from the COVID-19 pandemic,” said Amy Quackenboss, Executive Director, American Bankruptcy Institute (ABI).

“While stabilization programs have achieved their intended effect in keeping families and businesses afloat amid the pandemic, bankruptcy provides a proven economic shelter for companies and consumers facing mounting financial distress.”

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In late December 2020, Congress passed and President Trump signed HR 133, the “Consolidated Appropriations Act of 2021,” into law, which combined $900 billion in stimulus relief for the COVID-19 pandemic in the US along with a $1.4 trillion omnibus spending bill for the 2021 federal fiscal year. A new round of stimulus payments were provided to Americans; measures such as enhanced unemployment benefits, the Paycheck Protection Program and eviction moratoriums were re-established; and greater bankruptcy-relief measures were incorporated into the new law.

Total bankruptcy filings for the month of December decreased 35% to 34,307 in 2020 from 53,066 filings in December 2019. Similarly, non-commercial filings for December dropped 36% to 32,121 compared to 50,160 in the same month last year. Commercial filings also witnessed a 25% drop to 2,186 in December 2020 compared to 2,906 last year.

Commercial chapter 11 filings in December 2020 edged up by one filing, to 393 from the 392 commercial chapter 11 filings in December 2019.

The average nationwide per capita bankruptcy filing rate for 2020 decreased slightly to 1.71 (total filings per 1,000 population) from the 2.44 rate during 2019.

ABI has partnered with Epiq in order to provide the most current US bankruptcy filing data for analysts, researchers and members of the news media. Epiq is a leading provider of managed technology for the global legal profession.