The COVID-19 pandemic provided an unexpected financial boost to many in the U.S., but with the economy potentially facing a recession, households and businesses could have challenging months and years ahead. And after years of encouraging downward trends, this could mean that bankruptcies in the U.S. will once again be in focus.
The pandemic’s impact on consumer debt was one pleasant economic surprise. Amid government stimulus payments and forbearance policies, increased savings during COVID shutdowns, and a tight labor market with opportunities for wage growth, Americans have made strong progress in paying down debt over the last two years. But more recently, with inflation eating into budgets, lenders raising interest rates, and some industries seeing major layoffs, households are starting to feel greater financial pressures that could make it harder to keep up with debt payments.
While economic trends during the pandemic unquestionably helped a number of people and businesses with debt, bankruptcies were already declining steadily amid the recovery from the Great Recession. In 2009, business bankruptcy cases hit a peak of more than 60,000, while in 2010, non-business bankruptcies soared to a recession-era peak of 1.5 million. By 2019, business bankruptcies had declined by nearly two-thirds to 22,780, and non-business bankruptcies by around half to 752,160. Both figures fell even further in 2020 and 2021 in the wake of the pandemic.
See more in this weeks Boone County Journal