Charted: Bankruptcies dry up
2021 was a record year for much of the financial markets — but bankruptcies were a notable exception.
Driving the news: Bankruptcy filings for both individuals and companies were far lower than 2020’s activity, and remain below pre-pandemic levels, according to new data from Epiq Bankruptcy, a provider of data, technology and services.
Why it matters: The historic stimulus pumped into the economy in the wake of the pandemic has helped keep both consumers and companies afloat.
- That might be bad news for bankruptcy practitioners and distressed investors — but it represents a lifeline for people who lost jobs and companies that lost customers.
Of note: The Chapter 11 stats include a new category called Subchapter 5, which accommodates smaller businesses and went into effect in 2020. Despite that, 2021 volumes are well below those of the late teens.
State of play: For companies, "there is so much capital available in the market ... preventing what historically would have been more corporate filings," Chris Kruse, senior vice president at Epiq Bankruptcy.
What to watch: As the impact of stimulus payments wanes, individuals' bankruptcies may tick back up.
- "There is a growing belief that a large backlog of individual filings is growing ... they will hit at some point as the economy normalizes," Kruse says.