While the federal government hammers out the next round of economic relief, families and businesses are trying to sort out what it will take to get through this crisis.
Some businesses are already turning to bankruptcy to give them time and flexibility to reorganize and reset. Many individuals are probably going to end up doing the same thing.
“We certainly expect that filings will increase depending how long the country is going to be on lockdown, and how long the COVID-19 pandemic lasts,” said Amy Quackenboss, executive director of the American Bankruptcy Institute.
In April, Chapter 11 bankruptcies, which allow businesses to reorganize so they can try to survive, were up 26 percent from last year. That’s just the beginning, said Sara Sternberg Greene, professor at Duke Law.
“We will see some who just decide they can’t survive, and they’ll file Chapter 7, which is liquidation,” she said.
For now, Chapter 13 consumer bankruptcies are down. People are spending their savings and relief checks, said Ed Boltz, a bankruptcy attorney in North Carolina. In normal times, he said, three main things cause bankruptcies: job loss, illness and divorce. And with the pandemic, “we’ve got two out of the three already hitting. And who knows what staying at home is going to do to relationships and marriages also?” he said.
But while a bankruptcy can wreck your credit and be a stressful experience, it can also provide an important backstop for the economy, said Matt Notowidigdo, economics professor at Northwestern University.
“One of the things the bankruptcy system does is it allows people to get a fresh start, and then try to resume somewhat back to their old path of spending, and that can help the economy overall,” he said.
Correction (May 14, 2020): An earlier audio version of this story misidentified Notowidigdo’s university. The audio has been corrected.
COVID-19 Economy FAQs
It’s still the question on everyone’s minds: What’s going on with extra COVID-19 unemployment benefits?
The $600-a-week payments have ended, officially, as of July 31. For now, there is no additional federal pandemic unemployment assistance. House Democrats want to renew the $600 payments. Senate Republicans have proposed giving the unemployed 70% of their most recent salary by this October, when state unemployment offices have had time to reconfigure their computer systems to do those calculations. Until then, jobless workers would just get another $200. But, nothing has been agreed upon yet.
What’s the latest on evictions?
For millions of Americans, things are looking grim. Unemployment is high, and pandemic eviction moratoriums have expired in states across the country. And as many people already know, eviction is something that can haunt a person’s life for years. For instance, getting evicted can make it hard to rent again. And that can lead to spiraling poverty.
Which retailers are requiring that people wear masks when shopping? And how are they enforcing those rules?
Walmart, Target, Lowe’s, CVS, Home Depot, Costco — they all have policies that say shoppers are required to wear a mask. When an employee confronts a customer who refuses, the interaction can spin out of control, so many of these retailers are telling their workers to not enforce these mandates. But, just having them will actually get more people to wear masks.
You can find answers to more questions on unemployment benefits and COVID-19 here.
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