All over New York there were discouraging signs. “Retail Space for Rent” almost always indicated a business that had gone out of business. When businesses fail, other businesses in the neighborhood notice, as do related businesses. And yet businesses keep going as long as they can.
In fact, the only section of our economy that behaved normally during 2020 were those who filed for bankruptcy under Chapter 11, using Chapter 11 to renegotiate big business debt (i.e. J.C. Penney and Neiman Marcus).
It was in personal bankruptcy filings that the decrease in bankruptcies was most severe. In Manhattan in 2020, in spite of all the business turmoil, fewer bankruptcies were filed than in 2019. The bankruptcy court in Brooklyn also suffered fewer bankruptcies, particularly after March 2020 when, in order to limit the spread of Covid-19, courts began to cut off public access.
The $2 trillion CARES Act was signed into law in March 2020. The aim of that law was to soften the blow of the pandemic. Various other government and private stimulus funds, and moratoriums against collections, foreclosures and evictions comforted people in the short term, and helped keep them from filing bankruptcy.
But the debt is still owed, and eventually creditors will start to collect, landlords will start to evict, and banks will start to foreclose. at that point the increase in personal bankruptcies is expected to be enormous. Most people who held off during the pandemic are likely to file under Chapter 13, known as “wage earners’ plans.” Some will also file under Chapter 7, commonly known as liquidation bankruptcies.
If you have questions about bankruptcy, please contact experienced Brooklyn bankruptcy attorney for a free initial consultation.