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US Government Aid Lessened Bankruptcies In 2020, Study Finds

Government pandemic aid helped bankruptcy filings hit a 35-year low in 2020, according to legal service firm Epiq.

In Epiq’s report on 2020 bankruptcy statistics, the firm found that 2020 had the lowest numbers since 1989, with 529,068 over all chapters, according to a press release.

December had 34,304 bankruptcy filings in total, which was also the lowest monthly total since January 2006, the release stated.

Chapter 13 filings were down 46 percent in 2020, with 147,144 filings being a decrease from the 2019 count of 272,420 filings. Chapter 7 filings were down 22 percent in 2020 with 348,428 new filings down from 444,931 for 2019, the release stated. Those numbers are a measuring stick for the economy, and Chris Kruse, senior vice president of Epiq AACER.

“We expect this category to grow substantially in the second half of 2021,” he said.

Chapter 11 filings, however, have risen year over year, with 29 percent higher in 2020, adding 7,128 filings in 2020 compared to 5,518 in 2019, according to the release.

Deirdre O’Connor, managing director of Corporate Restructuring at Epiq, said in the release that the higher Chapter 11 filings came from “preexisting distressed companies coupled with the onset of a zero-revenue environment.”

However, Epiq officials said in the release that recent government financial aid will help those numbers.

“New bankruptcy filings continue to slide into record territory as the global pandemic spurs regulatory intervention to keep U.S. consumers and businesses afloat,” said Kruse, per the release. “The second stimulus package totaling over $900 billion is getting capital into the market and delaying bankruptcy filings across the country.”

PYMNTS reported in September that retail bankruptcies were on track to hit 2010 levels, with retailers facing myriad problems, including government-mandated lockdowns, social distancing rules and a boost to eCommerce that could speed along bankruptcies. Statistics found that there were Chapter 11 filings for apparel and footwear stores, home furnishing stores, department stores and more, along with numerous store closures without bankruptcies.

Some small businesses, namely restaurants, weren’t satiated by the recent round of aid as there were no special funds for them. And small- to medium-sized businesses (SMBs) worried they would not survive the new lockdowns amid the virus wave over the holidays.

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