(Reuters) - Bankruptcy filings have started to increase this year and the number of new cases filed in March jumped significantly from February, but remain below last year's numbers, according to data released on Tuesday by legal research firm Epiq.
The total number of new commercial and consumer bankruptcies filed in March grew 33.5% over the month prior, according to Epiq, with consumer filings increasing by 34% and commercial cases jumping by 26%. Those figures build on the slight upward trend that began in February, which brought 3% more new bankruptcies than January, according to Epiq’s data.
But, the overall number of filings are still down compared to last year. The first quarter of 2022 brought a 17% decline in new filings compared with the same period in 2021, with consumer cases down 16% and commercial cases down 25%.
Bankruptcy filings have largely dipped since the COVID-19 pandemic hit the U.S. in March 2020, as government aid programs helped keep individuals and businesses afloat. But experts say that as those aid packages dry up, people and companies alike will start seeking debt relief via bankruptcy again.
“Amid rising interest rates, growing inflation concerns, worker shortages and supply chain challenges, access to bankruptcy is imperative for struggling consumers and businesses,” Amy Quackenboss, executive director of the American Bankruptcy Institute, said in a statement on Tuesday.
Chapter 11 cases, which encompass larger commercial bankruptcies, were up 38% in March over February, but down 43% for the first quarter of 2022 compared with the same period in 2021.
Small business bankruptcy filings known as subchapter V cases, a new type of filing that went into effect in February 2020 under the Small Business Reorganization Act, hit record numbers last month. Epiq said the 81 cases filed the week of Mar. 21 is the highest weekly total ever for that type of bankruptcy.
That spike came just before the $7.5 million debt limit for businesses that file under subchapter V was set to drop down to $2.7 million, though legislation is underway to permanently bring the debt limit back up to $7.5 million.
Individual filings could also increase if Congress passes legislation that would increase the debt limit under Chapter 13 of the bankruptcy code to $2.75 million from the existing $1.2 million. The bill, which was introduced in the Senate last month and has bipartisan support, aims to simplify eligibility for Chapter 13 protection and make it easier for self-employed people to qualify for bankruptcy relief.
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