Many predicted record numbers of personal bankruptcies this year. Many businesses downsized or closed for good. Millions of workers lost their jobs. Competition for vacancies soared, and the unemployment rate reached 14%. Yet, to the surprise of many, the number of people filing for personal bankruptcy has dropped. Figures for November show filings have not been so low since 2006.
Why are more people not filing for bankruptcy?
Businesses are continuing to file for bankruptcy in increasing numbers, so why aren’t individuals? Raymond Kluender from Harvard’s Entrepreneurial Management Unit believes there may be three possible reasons:
- A temporary halt on evictions: Many people file for bankruptcy when they fear foreclosure or eviction. With federal and state legislators passing laws to prevent or delay this, people have been able to hold on a little longer.
- The CARES Act: Money provided through the CARES Act might have allowed some families to scrape by for a while and many may hope to see their finances recover.
- People cannot afford to file: If you have lost your income source, every cent counts. Filing for bankruptcy is not free. Some people may have decided that spending on food and other essentials is a bigger priority.
- People could not file: Getting to a court was not always possible this year. Even when they reopened, some people may have decided it was safer to stay at home.
There may be a wave of personal bankruptcies to come
While some businesses and their employees have thrived this year, many will not do so for a long time. If your financial situation has not improved, holding off filing may be putting off the inevitable. The sooner you take action, the sooner you can begin to rebuild your future.