Bankruptcies Rise as Pandemic Aid Runs Away
Commonwealth’s end pandemic Aid has put many Americans and businesses under financial pressure, leading to a surge in bankruptcies.
The total number of bankruptcy filings in January increased 19% to 31,087 in January, up 19% from a year ago, according to data from legal research firm Epiq. The number of Americans filing for bankruptcy in Chapters 7, 11 and 13 surged 20% in January from a year earlier.
The surge in applications comes as rising interest rates and high inflation continue to strain household budgets.
“There is no more cash from the government,” Amy Quackenbos, executive director of the American Bankruptcy Institute, told CBS Moneywatch. “Some people are finally going through that economic crisis. They have to pay their mortgages and car payments. There are some people who haven’t been able to weather that storm.”
Employment difficulties in a tight labor market, ongoing war in ukraine Quackenboss also said some companies have filed for bankruptcy due to fears of a recession. That said, while bankruptcies are on the rise, they are still not at pre-pandemic levels, she added.
According to the New York Times, the Biden administration has sent Americans $817 billion in stimulus packages. estimate, but that lifeline ended in March 2021.Congress roared as well. outside It provided $800 billion in payroll protection loans to businesses large and small before that program ended in May 2021.
Bankruptcy experts say these federal funds have helped struggling businesses and individuals for about a year and a half, but reality is about to begin.
“Many companies were holding out during COVID-19 and recently filed for bankruptcy,” said Paige Marta Skiba, professor of bankruptcy law at Vanderbilt University. Businesses realized they couldn’t survive outside the protected world of payroll protection payments.”
Bankruptcy filings may increase
Hundreds of companies declared bankruptcy last year, but most of the headlines went to big brands. LeBron filed for bankruptcy in June Citing supply chain issues, Cineworld Group, the parent company of Regal Cinemas, said: Filed for bankruptcy in September It has $5 billion in debt.
Crypto companies such as BlockFi, Celsius Network, Three Arrows Capital and Voyager Digital also went bankrupt last year. However, none of these bankruptcy filings FTX TradingFTX co-founder Sam Bankman-Fried, from CEO of the third largest company in the crypto world, facing federal indictment About investor fraud following the sudden collapse of cryptocurrency exchanges.
Quackenboss said bankruptcy filings are likely to increase this year if the U.S. plunges into recession and the problems already affecting the economy worsen.
“The more bankruptcies, especially Chapter 7, the more services and industries will disappear and the jobs will disappear. That’s never a good thing,” she said.
There is one silver lining in the rise in bankruptcies. It could create the next big, successful company, says Steve Nickles, a law professor at Wake Forest University.
“Business is in decline, there’s a hole in the market, so there’s an opportunity,” said Nickles, who teaches about bankruptcy. “It sounds silly, but it’s true. Bankruptcy leaves a gap in entrepreneurship.”
https://www.cbsnews.com/news/bankruptcy-filings-2022-company-personal-epiq/ Bankruptcies Rise as Pandemic Aid Runs Away