Most think that bankruptcy filings are at record highs. Actually, bankruptcy filing numbers are at a historic low. In February 2021, bankruptcies nationwide dropped to 31,633 filings, making it the lowest month since 2006 (Epiq AACER). The chart below, provided by Epiq, shows bankruptcy filings over the last 15 years:
These numbers are even worse than you might expect. 2006 is the year after historic levels of filing before the effective date of the 2005 overhaul to the Bankruptcy Code known as BAPCPA. As a result, during 2006, case filings were at their lowest ebb in decades.
Why are so few people filing for bankruptcy now? We live in a time of massive unemployment, business closures, and economic uncertainty due to a global pandemic--you'd think that lots and lots of folks would need to file. Several reasons:
Lack of Urgency. Most people file when they have something to lose. Being threatened with a foreclosure, a repossession, a garnishment, attachment, or lawsuit prompts a call or email to a bankruptcy attorney to protect what they have. With mortgage forbearances and court closures, many of the reasons why people speak with a bankruptcy attorney are deferred to the future. Since no one wants to file for bankruptcy, this lack of a sense of urgency allows them to delay filing without any apparent bad thing happening.
Uncertainty. People do not know what the future holds. Will they get new employment? Will their business get back on track? Can they do a loan modification once payments restart? Until there is more certainty in the future, people tend to delay filing until they better know whether they can weather this storm.
"What Can They Do To Me?" If you're unemployed, have drained your retirement account, and can't pay anything anyway, you may think that there's no need to file.
Things are improving, and the economy will get better. A colleague of mine who represents lenders in foreclosure actions tells me that his firm alone has a backlog of over 100,000 foreclosures in Maryland. There is a huge amount of pent up creditor activity that is just waiting for the starting flag to drop before they will take action.
Now is the time to take a hard look at your finances, see what the future holds, and consider whether speaking with an experienced and knowledgeable bankruptcy attorney before things actually get bad makes sense for you.