In this article, we are going to talk about the impact that the coronavirus pandemic has cast on consumer bankruptcies in Nevada. Bankruptcies historically have come in handy when it comes to tracking the unemployment rate. However, amidst the pandemic, the situation has reversed. Due to the COVID-19 crisis, the filings have dropped at a dramatic rate.
As per the data collected by the American Bankruptcy Institute, the bankruptcy filing cases have dropped to 25%. Things were different at the same time a year ago. Chapter 7, bankruptcy filing has come down to 18%. On the other hand, Chapter 13 has lowered to 38%.
So, what can one make out of these statistics? Well, one side of the coin suggests that a low number of bankruptcy filings is a clear indication of economic stability. On the other hand, the other side of the coin suggests that it could be because of a reduced unemployment rate that bankruptcy filings have decreased.
However, both of these assumptions don’t seem the reasons here. As per the statistics, the unemployment rate in July in the US was around 10.2%. While the rate has improved, the country still remains as one with the highest unemployment rate. Now, why is the number of bankruptcy filing so low even though the rate of unemployment stands high? Let’s have a look.
Global reduction in human activity
Coronavirus has cast a drastic impact on everyone, both on professional and personal grounds. In order to curb the effects of the virus and to limit its spread, almost every state has put up some sort of restrictions as part of their safety protocol. This includes travel as well as business other general activities.
Not only this, but people even on their own have chosen to limit their interaction and movement. With social distancing becoming everyone’s first and foremost priority, the world is under strong spells of “anthropause.”
Considering this global reduction in human activity, the reason behind reduced filings could be that of debtors unable to start on the process or simply are not inclined towards it at this moment. And rightly so! In an attempt to follow the SOPs or out of fear of contracting the virus, many debtors must be hesitating or finding it unsettling to reach out to an attorney to start with the process.
When it comes to filing for bankruptcy, debt collection is the type of motivation that debtors seek. With courts and businesses choosing to place a collection moratorium on debt collection, the debtors must not be feeling the need to file for bankruptcy. Speaking of this, a quick search on moratorium will give you an exhaustive number of businesses and agencies that have imposed it. So, if a debtor owes anyone a debt, but moratoriums are in full swing, the urge to file for bankruptcy simply goes down or almost becomes non-existent.
The CARES Act
Congress put out CARES act as an attempt to provide assistance when the pandemic started to deal with the expected economic fallout. As a result of this, the unemployed individuals were able to bag lump sum cash as an assistance payout. In addition to this, they are getting $600.00 on a weekly basis as part of unemployment benefits.
Because of all these benefits, in addition to the moratorium, many people would have simply put the decision to file for bankruptcy at the backseat.
However, when the CARES Act’s $2trillion package expires in March, Nevada will witness an increase in the number of bankruptcy filings. For those Nevadans who have racked a considerable amount of outstanding payments, such as unpaid rent, it is time to prepare as due dates are fast approaching!
While the number of bankruptcy filers is low in Nevada, things are most likely to rise in the next year. We suggest that you already get an attorney on board to discuss your case and options.
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