The shutdown of a roaring economy as a preemptive strike against COVID-19 has rocked the American way of life for the long term. Because of soaring unemployment – a staggering 33 million+ people have lost their job since the virus erupted – combined with forced business closures and plummeting consumer confidence, an explosion of bankruptcies is widely expected.
We’ll see record-setting numbers of bankruptcies over the coming months, perhaps as many as many as a million by this time next year. But we’ll also see a change in perception. The number of bankruptcies and their cause will be viewed with less judgment, and the stigma surrounding bankruptcy will decrease.
The stigma of bankruptcy is consistent and pervasive. It’s born of a preconceived notion that people or corporations that file bankruptcy are greedy, dishonest, lazy and/or irresponsible. The facts contradict these perceptions: the top two causes of individual bankruptcy are medical bills and job loss, and a leading cause of business bankruptcy are outside market conditions. The majority of people don’t want to file bankruptcy. In fact, they often feel ashamed when they have to file.
The upcoming wave of bankruptcies will go a long way to wipe away this stigma. Everyone will know the root cause – a global pandemic.
It is my hope that this new understanding will persist post-COVID-19, that people will recognize bankruptcy as a way to put financial pressures on pause in order to regroup, reorganize and come through difficult situations. By paying off creditors, discharging debts, and resolving liens and judgments through bankruptcy, individuals ultimately end up with a clean slate and a new beginning.
Americans need to understand that bankruptcy was set forth by the U.S. Constitution as a safety net for unexpected difficulties that derail a person’s finances. Life can turn on a dime without any fault – as it has with this global pandemic.
Chad Van Horn, Esq., is the founder and managing partner of Van Horn Law Group, named among Inc. 5000’s 2019 fastest-growing privately held companies in the U.S. and the largest bankruptcy firm in Broward County based on cases filed in the last 12 months.* Van Horn is the author of Everything You Need to Know About Bankruptcy in Florida and The Debt Life. *See stats at www.pacer.gov.