A previous article on our website addressed the expected September surge in bankruptcy filings as the various financial protections that were extended to consumers during the Covid – 19 pandemic began to expire. However, that has not yet occurred, which has led to discussions between our office, other attorneys, and other small business owners in the Augusta area and surrounding counties to discover the reason why consumers have been able to manage their debts since March of 2020. Several different theories have been suggested, all of which combined together may provide the reason for the low amount of bankruptcy filings in the August Division at this time.
- Consumers immediately took steps to reduce spending Because the federal aid did not start immediately, many consumers had already adjusted their spending habits based on their income changes. Trips were canceled, and long-term purchases for vehicles were delayed. In fact, instead of buying new vehicles, many consumers used their stimulus checks or other benefits under the CARES Act to pay for long deferred maintenance on their paid for vehicles.
- Some consumers actually received more income under the CARES Act than they would have if they were employed Obviously it is not sound financial policy to base your long-term income and expenses on a benefit which is scheduled to expire. However, there was a sizeable group of consumers who worked at or slightly above minimum wage, or worked part-time, or worked as tipped employees who saw an increase in income as a result of the financial assistance offered by Congress.
- The Covid – 19 pandemic started before or immediately after consumers received their income tax refunds Many lower income consumers who traditionally receive a large refund due to various government credits were aware of Covid-19 and the expected changes in income, and were able to budget this money to manage expenses while their wage income was reduced or eliminated. If the pandemic had started two – three months later, these funds probably would have already been spent, either on new purchases, or applied to old debt.
- Creditor collection activity subsided Many courts closed down or shifted to remote operations, which reduced the amount of lawsuits being filed, and virtually eliminated trials for all civil matters. Even as the courts begin to reopen for regular business, the trial calendars will be so backed up that it will take a long time for many of the debt collection lawsuits to be resolved. In addition, various moratoriums on foreclosures and evictions, whether voluntary or government ordered, offered an additional layer of protection to consumers who were trying to protect their residences. While many of these moratoriums were projected to expire, they have either been renewed by lender consent, or lengthened by government action.
Ideally, circumstances will arise allowing our economy to resume its normal operations. However, long-term damage to the economy is expected, and personal bankruptcy filings will increase as a result. Our firm offers bankruptcy consultations at NO CHARGE, and one of our attorneys will be glad to discuss your financial situation with you and whether or not a Chapter 7 or Chapter 13 bankruptcy will provide the financial relief that you need.