Alongside the health crisis the COVID-19 pandemic has caused in the U.S., there is an economic crisis. Social distancing rules imposed in South Carolina and nationwide to slow the spread of the virus put millions of people out of work. While many workers furloughed early on in the lockdown have since returned to work, many people still must rely on unemployment benefits, either because they cannot go back to their jobs yet, or their jobs have disappeared.
Where are the bankruptcy filings?
Usually, when there is a recession and high unemployment, the number of Chapter 7 and Chapter 13 bankruptcy filings go up, as people become overwhelmed by credit card debt and unable to pay their mortgages. But so far this time, the opposite has happened: personal bankruptcy filings went down sharply from April through June.
It appears that the stimulus package Congress passed is the reason. Part of the stimulus law adds $600 per week to most unemployment payments. Besides using the extra money to buy basic necessities, experts believe that Americans receiving unemployment are using some of their stimulus funds to pay down their debts. In other words, so far, the recession has not driven household debt to the point that people are turning to bankruptcy.
However, that financial shield could soon be going away. The current round of federal stimulus will expire this month. Though Congress is scheduled to debate another round, it is possible that no new bill will pass. At that point, bankruptcy filings could start to go up.
Bankruptcy is there to help
Bankruptcy is a tool available to all Americans who have more debt than they can hope to repay. The process can be complicated, and the way to take the fullest advantage of bankruptcy is to turn to an attorney who practices bankruptcy law.