How Covid-19 Has Affected Bankruptcies in Alabama

The Impact of Covid-19

Covid-19 has changed our way of life. Every day, we find ourselves having to adapt. Our economy has also been impacted by high jobless numbers and rising medical bills. Change is always challenging and these changes have had a ripple effect on unexpected areas of our lives.

At Brock & Stout, we’ve continued to help clients through the struggles of the pandemic. We’ve seen, firsthand, how Alabamians are handling the financial pressure brought on by economic distress. We are grateful to be available to help anyone in Alabama trying to keep their financial head above water.

Covid-19 and the Alabama Economy

In the beginning of the Covid-19 pandemic, Alabama saw a statewide shutdown of all non-essential businesses. As in other states, workers in Alabama experienced dwindling hours and ever smaller paychecks. This greatly affected those who budget month-to-month or live paycheck to paycheck, causing many to fall behind on mortgage and rent payments, utility bills and credit card or loan payments. Circumstances have not improved, making it difficult, if not impossible, for those falling behind to catch up.

Many Alabamians across the state do not have easy access to affordable lines of credit and rely on small loan companies that charge exorbitant interest rates to cover the loss of income. This stopgap only creates a deeper financial hole when payments are made late or not at all. Even those who have readily available credit have found themselves having to rely more heavily on credit.

Regardless of the type of credit used, for those unable to pay, late fees and penalties can accumulate quickly. This can sometimes lead to the point where it is financially impossible for someone to get out of debt. Brock & Stout consumer bankruptcy attorney, Spencer W. Jones refers to this as the “debt trap”. The debt trap wasn’t brought on by Covid-19; it has been an issue that has plagued Alabamians for some time. Jones continues, “The pandemic has just exacerbated the problem. Common sense would tell you that this would result in more people having to file for bankruptcy. However, Covid has had a chilling effect across Alabama. Out of personal or public health concerns, more and more people are postponing activities that, before Covid, were considered normal, everyday activities; this includes attending to financial matters.”

Bankruptcy and Covid-19 in Alabama

The judicial system in Alabama has not been immune to the impacts of the pandemic. This includes the bankruptcy courts. Like other professions, the courts have been forced to adopt safety measures designed to protect the public, as well as judges, attorneys, and other court staff from exposure to the Covid-19 virus.

Many of these adaptations have, in fact, led to an easier, more streamlined bankruptcy filing process. Prior to these changes, bankruptcy hearings were required to be conducted in person at the courthouse; Many hearings can now be conducted electronically over the internet or via telephone. In addition to reducing the risk of exposure to covid, this saves you valuable time spent commuting to and from the courthouse and increases the efficiency of scheduling for the courts. We hope that many of these time saving changes become permanent.

At Brock & Stout, we have adjusted our office procedures to protect the health and well being of the public and our staff. Our law firm has a long-established tenet of serving the communities around us. We have made the choice to be flexible and willing to deviate from our normal business practices as necessary. This allows us to continue to serve the people of Alabama while ensuring we minimize the risk of potential exposure to the virus. Following the example of the Alabama courts, we have been meeting with an increased number of our clients over the phone and via video conferencing. We have and will continue to wear masks as necessary and maintain appropriate social distancing when meeting with new clients in person.

Bankruptcy Trends Throughout Covid-19

From the beginning of the pandemic, Alabama has seen an overall decrease in the number of bankruptcy filings. The most recently released figures by the United States Courts shows that in the quarter ending June 30, 2020, a total of 4111 bankruptcies were filed in Alabama. In the same quarter a year ago, a total of 6622 bankruptcies were filed.

However, of the cases being filed, we have seen an increase in the number of Chapter 7 Bankruptcy filings in relation to Chapter 13 Bankruptcy filings. We have also seen an increase in the number of cases that have been converted from Chapter 7 to Chapter 13. This is because many Alabamans have experienced job loss as a result of the pandemic. When you do not have an income source, Chapter 13 Bankruptcy is simply not feasible or sustainable.*

There have also been more Chapter 11 Business Bankruptcy filings this year. In this challenging time, when unemployment is elevated and business bankruptcies are on the rise, a decrease in case filings overall across the state is deeply concerning. For the first time in history, unemployment is up and bankruptcy filings are down. Mr. Jones, an Alabama bankruptcy attorney for the last 6 years, states, “I believe the people of Alabama are hurting right now but the pandemic is preventing them from seeking the help they need. My theory is that filings are down due to people exercising extreme caution to prevent the spread of Covid. That, coupled with the fact that people are socially distancing at work and there are fewer social gatherings, many people don’t know bankruptcy is an option. Many clients seek our help because a friend referred them and when the social interactions are limited, there are fewer opportunities for that useful information to be shared.”

The link between the bankruptcy cases that were filed in Alabama this year isn’t difficult to see. 2020 bankruptcy filers were frequently Alabamians who owned or were employed by businesses that were deemed nonessential during the shutdown. Additionally, others filing bankruptcy in Alabama had a contributor to the household income that owned or was employed by a business that was deemed nonessential.

Brock & Stout: Continuing to Serve You

At Brock & Stout, we are dedicated to providing the same level of individual attention and care to each client that we’ve always provided. We believe in taking precautions because we truly care about the health and well-being of every member of our team as well as every client. Making the choice to file for Bankruptcy is never an easy decision and we understand that finances are extremely personal for most people.

Every bankruptcy attorney on our team believes that it is extremely important to establish trust and build a relationship with their clients. We want you to be comfortable discussing your financial issues with us. Even though Covid-19 has brought with it the necessity to maintain social distance we strive to assure our clients that we understand their troubles and that we are still here to assist them through these challenging, changing times. We’ve all had to make changes during the pandemic but one thing that has not changed is our desire to serve the people of Alabama, including Birmingham.

If you continue to struggle financially and think Bankruptcy maybe your road to financial freedom, call Brock & Stout today. We are ready to help you regain your financial footing and find some relief through the ongoing pandemic. Your initial consultation is always free.

Resources

*(U.S. Bankruptcy Courts, Bankruptcy Filings, Table F-2 Quarterly, U.S. Bankruptcy Courts—Business and Nonbusiness Cases Commenced, by Chapter of the Bankruptcy Code,During the Three-Month Period Ending June 30, 2019, Based on Data Current as of June 30, 2019)

(U.S. Bankruptcy Courts, Bankruptcy Filings, Table F-2 Quarterly, U.S. Bankruptcy Courts—Business and Nonbusiness Cases Commenced, by Chapter of the Bankruptcy Code,During the Three-Month Period Ending June 30, 2020, Based on Data Current as of June 30, 2020)