Overall, 2020 was not a good year. We had a global pandemic, which triggered an economic crisis. As a result, you might expect to see a huge jump in the number of bankruptcies filed. But data from the courts tells a different story. Statistics released by the Administrative Office of the U.S. Courts show a 29.7% drop in the number of bankruptcies filed in 2020 compared to 2019.
It appears that the economic stimulus packages passed by the federal government may have helped many people avoid financial ruin. Or, it could be that the worst is yet to come. The press release accompanying the court data notes that following the 2007 economic crisis, bankruptcies didn’t peak until 2010.
Trying to predict the future is impossible, but looking at hard data can give us an idea of what is already happening and suggest trends. The data shows that while personal bankruptcies dropped significantly, business bankruptcies actually increased. Chapter 11 reorganizations rose 18.7%, from 7,020 in 2019 to 8,333 in 2020. Of those, 7,786 involved business reorganizations.
The Washington Post did a deep dive on the increase in business bankruptcies to see what types of businesses were hit hardest:
Data on a subset of businesses ― those registered as corporations ― shows that some sectors are faring much worse than others, with restaurants, retailers, entertainment companies, real estate firms and oil and gas ventures filing for protection in far greater numbers than in previous years, according to New Generation Research.
Bankruptcies filed by entertainment companies in 2020 nearly quadrupled, and filings nearly tripled for oil and gas companies, doubled for computer and software companies and were up 50 percent or more for restaurant owners, real estate companies and retailers, compared with 2019, data from the research firm shows.
Other sectors have so far not fared as badly as one might expect, as only 77 hotel or gaming companies filed for protection in 2020, down from 92 in 2019 ― a year when the tourism industry thrived.
Wisconsin is home to businesses in all of these industries (yes, even oil and gas if you consider frac sand mining to be part of that industry). Looking at Wisconsin-specific data from the U.S. Courts, you can see the number of personal and business bankruptcies filed in each Wisconsin county during 2020. As usual, Milwaukee and the surrounding counties have the most of both types.
We know the data on what is happening to others is of little comfort when you are struggling to keep your head above water. No matter what is happening to others, we are here for you when you need bankruptcy counsel. The Hanson & Payne team handles both personal and business bankruptcies for people and organizations in the Milwaukee area.