Recently several news outlets have reported that due to the CARE’s act, Bankruptcy Filings are down 34% nationwide. Some are saying that the reduction is due to the temporary assistance from CARE’s act payments and moratoriums on evictions and foreclosures. While the Stimulus Payments may be a temporary Band-Aid on a larger problem, it may not be the only reason bankruptcy filings are temporarily down. This recent news article did not take into consideration the law firms that have also had to abide by the shelter in place orders during this time and have potentially seen slows in productivity as firms halt in-person meetings and either close temporarily or adapt to working remotely.

The slight reduction in filings are most likely temporary. In July when Care’s Act funds and stimulus payments are no longer being issued, many businesses and individuals will further feel the sting from the economic impact COVID has had. It is also interesting to note that the states and major cities that report the most drastic reductions in filings were hit hardest with COVID-19 confirmed cases and had a longer shelter in place mandate, New York, and Manhattan to be specific.

Stimulus Payments

The stimulus payments may have kept the boat temporarily afloat, but it was just a brief reprieve from the inevitable. With landlords and property management companies providing COVID related deferments to their tenants, it won’t be long before the property owners begin to fall behind on their mortgages with the lack of rental income. This will cause a chain reaction of foreclosures and evictions later down the line.

Smaller businesses like restaurants, salons, and bars may have managed to stay afloat for now if their lease payments have been deferred. When those businesses re-open and it is time to catch up on those deferred payments, will that be realistic or feasible after months with little to no income? Reopening at a lesser capacity to encourage social distancing means that many of these businesses will be operating with the same expenses and still suffering a reduced income.

Second Stimulus

There are still so many variables to the COVID-19 equation that have not yet been solved. There are discussions of a potential second stimulus in various forms that either put funds directly into Americans’ pockets or provides incentives to bail out the struggling travel industry. The curve that we have worked so hard to flatten over the last three months has begun to spike again as businesses begin to reopen. As devastating as the last shelter in place was economically, a second wave and a second shelter in place are not unrealistic concerns.

For more information, contact your Folsom bankruptcy attorney at (916) 780-7005.

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