The coronavirus pandemic that has sickened over 450,000 people in the United States and claimed thousands of lives will also create a surge in bankruptcies that is likely to eclipse that of the Great Recession.
“The assumption is that whatever happened in 2008 to 2009 in terms of bankruptcies, this is going to be worse,” said Desmond Lachman, an economist at the right-leaning think tank the American Enterprise Institute. “So you’ve got to brace yourself for the whole wave of bankruptcies.”
The surge of personal and business bankruptcies that began in 2008 because of the financial crisis reached its peak in 2010 when nearly 1.6 million bankruptcies were filed, according to the Administrative Office of the U.S. Courts. In 2009, there were 1.4 million bankruptcies and 1.1 million in 2008, according to the organization.
Aaron Klein, a fellow of economic studies at the Brookings Institution, thinks these numbers will be exceeded if the economic shutdown persists long enough to kill the Major League Baseball season, which has already postponed Opening Day because of the virus. …
… Since the Great Recession the number of bankruptcies have declined, with roughly 774,000 bankruptcies being filed in 2019. The total number of bankruptcies also declined in the first quarter of 2020 by 5% when compared to bankruptcies filed during the first quarter of 2019, according to the American Bankruptcy Institute (ABI).
That is about to change. Economists from the Federal Reserve expect between 200,000 and 1 million bankruptcies will be filed over the next 12 months. The increase in filings is expected to start this month.
“We will likely see an increase in bankruptcies, starting with business filings in April and May, and increased consumer filings to follow,” ABI Executive Director Amy Quackenboss told the Washington Examiner via email. …
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