With the current health situation, Kentucky residents and people throughout the nation have had a host of concerns. Job loss and medical expenses have been worrisome, but surprisingly, there has not been a commensurate rise in bankruptcy filings. This could easily be a misunderstood leading to a perception that people are not in as difficult financial shape as expected. In truth, there are other reasons why there has been a marked decrease in bankruptcies. That is expected to change in the coming months.
Bankruptcy filings plummeted in the spring
In April, there were 47% fewer bankruptcy filings than in 2019; for May, it was 43% less. For the first six months of the year, there was almost one-quarter fewer bankruptcy filings when compared to the same time-frame in 2019. This is not because people are experiencing less financial hardship, but because of circumstances making it difficult to file. Law offices and courts were not operating because of nationwide shutdowns. People who were having trouble paying their mortgages and rent got something of a reprieve because foreclosures and evictions were paused. Government payments to help people who were negatively impacted staved off the need to file for bankruptcy. Creditors gave debtors wiggle room to pay their bills.
As things normalize, financial problems could spike bankruptcies
People who were out of work because of the crisis and expect to be hired back could find that the business is closed and there is no job to return to. Landlords and banks might become aggressive in seeking payment for past due bills, adding to financial distress. There may be hefty medical expenses. Eventually, people who avoided bankruptcy when they otherwise might have filed in the spring or summer could need to file during autumn.
Bankruptcy can help clear or reduce overwhelming debt
Financial challenges can happen to anyone for many reasons. People are often reluctant to file because they think they are abandoning their responsibility to pay their debts. They could have concerns about what it will do to their credit. Or they do not realize that it is a legal strategy to get on stronger financial ground. Whether it is a Chapter 7 liquidation or a Chapter 13 payment plan, bankruptcy can help to retain certain properties and move forward free of the constant calls and letters from creditors and debt collectors. To understand the process and take the necessary steps to file, consulting with a qualified legal professional may help.