Is Bankruptcy on the Rise Due to High Unemployment Rates?

 Posted on September 17, 2020 in Bankruptcy

It is no secret that the economy has taken a significant hit from the COVID-19 pandemic. As stay-at-home orders initially went into effect back in March, the unpredictability of the virus has many restaurants and other businesses slowly opening as cases fall, only to reel back their services as cases rise again. The uncertainty regarding when things will go back to normal has forced many American businesses to make tough decisions about their workforce, including filing for bankruptcy. Although the entire country has taken a hit from COVID-19, Floridians are seeing some of the most significant financial distress in the country.

Looking at the Numbers

WalletHub conducted an economic analysis of all 50 states to determine who has been hit especially hard by the pandemic. According to their research, Florida ranks as the fifth-worst state when looking at the financial situation of its residents. The analysis was done by looking at credit scores; the number of people whose financial accounts are in forbearance or have deferred payments; the change in the number of bankruptcies filed in January versus July; and search trends for the term “bankruptcy” within that state. It was found that approximately 1.16 million Floridians were unemployed in July, resulting in an 11.5 percent unemployment rate for the state. The location for most of these unemployment numbers? The Miami-Ft. Lauderdale-West Palm Beach metro area with just over 402,000 residents unemployed that same month.

What About Bankruptcy?

With such a high unemployment rate throughout the state, one would expect bankruptcy filings to be through the roof. According to a South Florida Business Journal report, South Florida has yet to see a flood of business bankruptcies, but it is expected that things are about to escalate. Looking at bankruptcy numbers, however, is not necessarily a reflection of the number of closing businesses. Smaller businesses may be able to finance their debt without the need for filing for bankruptcy. Many decide that it is easier to pay their utilities, discuss their contracts with their vendors, and dissolve their business without involving the legal process of bankruptcy. However, history has shown that bankruptcy filings increase gradually after the start of an economic decline. During the last recession in 2008, bankruptcies peaked two years after the start of the financial crisis. With historical trends such as these, personal and business bankruptcy filings are likely to increase in the next few months, especially at the start of 2021.

Contact a Broward County Bankruptcy Lawyer for Help

If you have noticed a significant financial turn for your business, it may be time to consider your other options. Continuing to allow debt to pile up while waiting for the economy to resurge is not a good plan for a business owner. Whether you need business advice or are seriously considering filing for bankruptcy, you should speak with a knowledgeable business lawyer. The Elliot Legal Group, P.A. provides clients with general counsel, business contract reviewal, and bankruptcy assistance when necessary. If you are finding yourself unsure of how to make your business ends meet, contact our Fort Lauderdale, FL business attorney today at 754-332-2101.

Sources:

https://www.bizjournals.com/orlando/news/2020/09/10/florida-citizens-among-most-financially-distressed.html

https://www.bizjournals.com/southflorida/news/2020/09/01/bankruptcy-filing-trends-in-south-florida.html