United States Bankruptcy Court District of Minnesota

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Back on the AO I had thread about the United States Bankruptcy Court District of Minnesota.

At first, I was wondering why there’s a spike of filings in the months surrounding April. The answer, more or less, is that’s when people get the refund from filing their tax returns and so that’s when they have enough money to pay for all the costs associated with filing for bankruptcy.

The last discussion was about the low number of bankruptcy filings seen starting ~ April 2020. (See Monthly Case Filing Statistics | District of Minnesota | United States Bankruptcy Court). I wondered, “Why? If the economy is going so poorly & people/companies are losing their jobs/businesses left & right, why haven’t filings sky rocketed? Instead, they’ve plummeted.”

I don’t specifically recall the discussion, but I’m sure people mentioned the bailout money.

Today, the Federal Reserve Bank of Minneapolis published this article:

Why are Ninth District bankruptcy rates so low? | Federal Reserve Bank of...

@Key Point 1

While debt load for both households and businesses grew during the pandemic, their ability to pay grew faster, thanks in part to federal stimulus checks, larger unemployment checks, and forgivable business loans. The government also temporarily stopped foreclosures on federally backed home loans and repayment of federal student loans.

@Key Point 2

what could be helping debtors now is rising wages resulting from strong demand for workers
…
Income, the lack of which is another key factor in bankruptcies, grew faster than debt.
…
government benefits grew the most, more than making up for declining earnings during parts of 2020…[Earnings] soon rebounded…

@Key Point 3

The government also blocked foreclosures for federally backed loans and paused repayment of federal student loans…
[Courts that could lead a person to file for bankruptcy] were shut down in the early days of the pandemic.

@Key Point 4

The decline of business bankruptcies is a similar story to that of consumers: debt is up but so is income, and government benefits have played a key role.

@Interesting Point

Ironically, among the businesses that have suffered more in the pandemic are law firms specializing in bankruptcies.

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I’ve been missing the updates on the Monthly Case Filing Statistics | District of Minnesota | United States Bankruptcy Court website but caught one today.

So far, filings are up 21% over last year.

I imagine interest rate hikes are at least one factor.