Bankruptcy Predictions for 2021
Read this blog post to find out more about bankruptcy predictions for 2021, and how attorneys can prepare to handle expected trends.
  • bankruptcy
Meredith Boe
Published on Dec 23, 2020

 

With 2020 almost behind us, many are wondering what the state of bankruptcies will be in 2021 as the effects of COVID-19 continue to alter the economy. Bankruptcy continues to help debtors find a new start when there’s no way for them to get on top of burdensome debt, which is too often the reality even with government stimulus.

 

In early December 2020, weekly unemployment claims reached 885,000, and it’s estimated that 60% of business closures from the pandemic are permanent. Bankruptcy attorneys may have their work cut out for them as we start the new year.

 

Let’s look at a few bankruptcy predictions for 2021.

 

 

Bankruptcy trends for 2021

Certain government assistance is set to expire either at the end of 2020 or early in 2021. The new stimulus package that was just passed extends some unemployment benefits until March 2021 and eviction protections until the end of January 2021.

 

Because these forms of assistance may end very soon, Chapter 7 bankruptcy filings will likely increase in 2021 for both individuals and businesses impacted most by the pandemic. Chapter 11 business filings have already increased and will likely continue into the new year as more businesses are struggling and their Payment Protection Program loans are expiring. According to Bloomberg data, business bankruptcies saw a peak in summer 2020 and decreased again in the fall.

 

Even while business bankruptcies saw an increase this year, individuals haven’t seen a surge yet. The first quarter of 2020 actually saw a 1.1% dip in bankruptcy filings. At the end of July 2020, it was reported that bankruptcy filings fell 11.8% within the preceding year.

 

This is largely because of government assistance like unemployment and loan programs that have kept people afloat as they were laid off from work or had trouble finding stable employment during the pandemic.

 

Some predict that the big surge in bankruptcies won’t happen until the middle of 2021 as all of these factors start to culminate.

 

Another trend could come if the proposed Consumer Bankruptcy Reform Act is passed. Changes would be made to the bankruptcy system, including a replacement of two separate bankruptcy chapters with just one. Another change the Act proposes is that student loan debt would be included with dischargeable debt.

 

 

What 2021 will mean for bankruptcy attorneys

Bankruptcy attorneys will see an influx of cases as the need for bankruptcy increases next year. Make sure you’re prepared by getting additional help from a virtual paralegal or expanding your practice to include bankruptcy law.

 

Use a software like NextChapter to streamline case management for your bankruptcy practice. Faster processes are a must as your workload increases, and NextChapter can help every step of the way.