CORONAVIRUS AND PERSONAL BANKRUPTCIES IN OHIO: WAITING FOR A BUBBLE TO POP?

June 2020: Ohio Personal Bankruptcy Filings Down 28%

As Ohioans are beginning to return to work, many of us are calculating the financial damage that we have incurred due to the COVID-19 pandemic.  Since mid-March 2020, we have seen business interruptions, a massive rush on the state’s unemployment compensation system, stimulus checks, lack of daycare, homeschooling, loan deferments, eviction protections, and the list continues.  But as we get deeper into Summer and as some of the relief begins to disappear, what happens next?  How will Ohioans repay 4 months of rent or catch up on other missed payments?  Are we anticipating a rush on personal bankruptcies in Ohio?  It almost feels like a balloon is about to pop.

For the fourth straight month, personal bankruptcy filings in Ohio were down.  According to bankruptcy filing statistics provided by the US District Bankruptcy Court, Northern District of Ohio, there were 1,172 personal bankruptcy filings in Northern Ohio last month.  This figure compares with 1,628 such filings in June 2019, a 28% decrease in personal bankruptcy filings.  Locally, personal bankruptcy filings for June 2020 in Toledo, Ohio showed a similar decline with 20% fewer personal bankruptcy cases filed. 

Thoughts To Consider?

So what are we to make of this news?  Generally, a decline in personal bankruptcy filings signals a strong economy with plenty of available jobs.  Conversely, rises in unemployment coupled with deferred loan payments typically correlates to a weak economy.   During weak economic times it is common to see a spike in personal bankruptcy filings.  All of this begs the question, why are personal bankruptcy filings down during the COVID-19 pandemic?  Does this trend signal a future storm of personal bankruptcy filings in Ohio?  How long can Ohioans hold off their creditors?

It’s possible that many Ohioans are waiting to see how the Coronavirus Pandemic plays out.  Not knowing when this pandemic will end, many of us are trying to hold off our creditors and landlords as long as we can.  But as the Court’s are beginning to open up it is anticipated that collection lawsuits will surge, leading to future wage garnishments.  So, when should someone file for personal bankruptcy relief from their creditors?

In a perfect world, most individuals would prefer to file for bankruptcy relief after the COVID-19 pandemic, but before a wage garnishment begins.  Many times it becomes impossible to perfectly balance these two factors.  For those who can wait to file until the COVID-19 pandemic ends, medical bills resulting from COVID-19 can still be included.  Conversely, those individuals forced to file earlier due to a wage garnishment face the risk of incurring substantial medical debt post bankruptcy.  It is important to keep in mind that chapter 7 bankruptcy eligibility rules require 8 years to pass following a previous chapter 7 bankruptcy filing.  Debtors who are still ineligible for Chapter 7 bankruptcy relief, may choose to research the pros and cons of filing for relief under Chapter 13 bankruptcy.  While a Chapter 13 bankruptcy involves a repayment plan lasting 3-5 years, it does offer many valuable protections.  Chapter 13 bankruptcy offers protection from wage garnishments, creditor lawsuits, and Chapter 13 bankruptcy debtors are able to include debts such as child support arrears, back taxes, mortgage arrears, and student loans.  When considering a Chapter 13 bankruptcy, it is important to find an experienced Toledo bankruptcy attorney as these cases tend to be more complex.

As we wait to see how the Coronavirus pandemic plays out, many of us will continue to tighten our budgets and keep our families healthy and safe.

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