Bankruptcy filings fall again in 2021, holding off expected ‘wave’

Bankruptcy filings fell again in 2021, dropping 24% nationwide.

The Administrative Office of the U.S. Courts on Friday released the total number of bankruptcy filings for the 12-month period ending Dec. 31, 2021. During that year, a total of 413,616 bankruptcy cases were filed, compared to 544,463 in 2020.

Business filings, in particular, saw a 33.7% drop, from 21,655 in 2020 to 14,347 in 2021. Nonbusiness filings also fell from 522,808 to 399,269, a 23.6% drop.

The Indiana Northern and Southern District Indiana Bankruptcy Courts recorded similar declines.

In the Northern District, total bankruptcy filings decreased by 17.5% in calendar year 2021, down from 6,833 in 2020 to 5,634 in 2021.

Likewise in the Southern District, a drop from 10,465 to 8,853 resulted in a 15.4% decrease.

“Unemployment temporarily spiked in March 2020, when the COVID-19 emergency intensified. However, several factors may have impacted individuals’ decisions about whether to file for bankruptcy since the crisis began,” according to the U.S. Courts. “For instance, increased government benefits and moratoriums on evictions and certain foreclosures may have eased financial pressures in many households.”

The continued drop in bankruptcy filings since the onset of COVID-19 has surprised economists and bankruptcy attorneys, who earlier in the pandemic had been bracing for a “wave” of bankruptcy cases. But that wave has yet to come.

Some speculate that changes in household consumption during the pandemic provided some financial cushion for American families, while others have pointed to increased leniency from banks and creditors. 

But some pandemic-related consumer protections have already ended, including federal and state eviction moratoriums. As those consumer relief programs have expired, government and court officials in Indiana have put their focus not on bankruptcies but on staving off a wave of evictions.