The Surge and Impact of COVID-19 on Bankruptcy Cases

By Alexander Hernandez, J.D., Professor, and Author of Consumer Bankruptcy Law (Routledge).

Updated on January 26, 2025.

Business bankruptcies continue to rise, with both Chapter 11 bankruptcy and Chapter 7 bankruptcy.

Listen: The Professor’s Audio Briefing.

Key Takeaways:

• Chapter 11 bankruptcy filings for businesses have skyrocketed.
• Well-established companies, particularly retail companies, are filing for bankruptcy as they struggle to adapt to the marketplace.
• The rise in bankruptcies extends beyond businesses, with Chapter 7 filings increasing for companies and individuals.

A Deeper Dive:

Data from EPIQ, a platform widely used in bankruptcy for lawyers and trustees alike, reveals the concerning trend. Chapter 11 bankruptcies, primarily utilized by businesses, have surged by over 72%. Chapter 7 bankruptcies have risen by 19% to 25,627. Personal bankruptcies have also experienced an 18% increase.

The post-COVID-19 era has witnessed a significant surge in bankruptcy filings. High-profile companies such as SmileDirectClub, WeWork, Rite Aid, Party City, Bed, Bath & Beyond, and David’s Bridal have all filed for bankruptcy.

• BIG Lots and Party City File for Bankruptcy

The Federal Reserve reports these findings, including increased individual bankruptcies, particularly Chapter 7 and Chapter 13 filings. Consumer credit card debt has also reached an all-time high.

The COVID-19 Impact on the $1.3 Trillion Credit Card Debt

During the COVID-19 pandemic, creditors largely refrained from aggressive collections and filing debt collection lawsuits since they realized debtors were likely not earning income or at least less income. So there’s no point in a creditor filing a lawsuit if there’s no way to collect.

This shows the about-face of lenders who failed to be flexible with homeowners during the 2008 mortgage foreclosure crisis. For now, creditors are more open to renegotiating debt, and granting a forbearance on payments has become the norm.

My experience with clients confirms that creditors are willing to provide temporary relief from debt payments for credit cards, mortgages, car loans, and student loans.

A forbearance, which creditors usually grant, typically involves a temporary postponement of payments. However, note that the debt in that period isn’t wiped out but deferred and added to the end of the loan term. For example, a 6-month mortgage forbearance would extend the loan term by 6 months. But when facing financial difficulties, that could be the lifeline you need.

The increase in bankruptcy filings can be tied to creditors resuming debt collection even though many individuals have yet to recover from the coronavirus pandemic’s financial impact. Even my wife and I are experiencing this, as my wife is earning significantly less than before.

To see this Podcast on YouTube, click here.

Colleges and universities can purchase my bankruptcy law textbook directly from Routledge Publishing. Paralegals and students who are buying single copies can do so via Amazon Books. To access my YouTube channel, click this link. You can also listen to my podcast on Spotify.

You can learn more about filing for bankruptcy and the bankruptcy petition via this link. Information on the bankruptcy court system, contact information for trustees, and your state’s exemptions can be found here. The federal bankruptcy exemptions are listed here. The latest version of the 341 Meeting of the Creditors can be found here.

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Please note that the information on this site does not constitute legal advice and should be considered for informational purposes only.