How Will This Unwind? Amid Stimulus, Forbearance, Eviction Bans, Consumer Bankruptcies Dropped to Lowest in Decades. Commercial Chapter 11 Bankruptcies Highest in Years

Weirdest Economy Ever, as 20 million people still claim unemployment benefits.

By Wolf Richter for WOLF STREET.

Total bankruptcy filings by consumers and businesses in the US in 2020, across all chapters of bankruptcies, plunged by 30% from 2019, to just 529,000 filings, according to legal-services provider Epiq Systems. This was the lowest number of total bankruptcy filings since 1986.

The plunge in filings was largely driven by consumers, who account for 94% of total bankruptcy filings, and who were awash with stimulus money and extra unemployment benefits (historic Epiq data via American Bankruptcy Institute):

Bankruptcy filings by consumers alone plunged by 31% from a year ago to just 496,000 filings, the lowest since 1987. Following the Financial Crisis in 2011, consumer filings had surged to 1.38 million as consumers were unwinding their credit card debt, mortgages, and HELOCs. But not during this crisis. Though 20 million people are still claiming state or federal unemployment benefits, the opposite happened in the Weirdest Economy Ever.

Under a flood of stimulus money, consumers triggered a historic drop in credit card debt and a sharp drop in credit card delinquencies. Auto loan delinquencies also declined. But 5.5% of all mortgages are still in forbearance where borrowers don’t have to make mortgage payments – 2.7 million mortgages! And eviction bans allow renters to skip rent payments. And even consumers that were in arrears didn’t have to fend off creditors and landlords with a bankruptcy filing (historic Epiq data via American Bankruptcy Institute):

Total commercial filings under all chapters fell 15% to 33,000 filings, powered by a 40% drop in commercial Chapter 13 filings and a 14% drop in commercial Chapter 7 filings.

But commercial Chapter 11 filings – when a business attempts to restructure its debts while operating rather than liquidating – surged 29% to 7,128 filings, the highest since 2012 when the effects of the Financial Crisis were winding down.

These filings include some of the biggest names in retail and shale oil & gas, but also thousands of small businesses that ran out of financial rope, with their businesses either shut down or activities diminished to where they could no longer deal with their obligations:

In terms of larger companies that are publicly traded, or private companies whose debt is publicly traded – this is based on data from S&P Global – Chapter 11 bankruptcy filings rose 9% in 2020 after having already surged 13% in 2019, to 630 filings, eking past 2011 (629 filings), making it the largest number of filings since 2010:

These companies include the most illustrious examples of the brick-and-mortar meltdown that has been crushing mall stores for three years, but sharply accelerated during the Pandemic: J. C. Penney, Ascena Retail Group (Ann Taylor, LOFT, Lou & Grey, Lane Bryant, Cacique, Catherines, and Justice; it had already shut down Dressbarn in 2019), Neiman Marcus, Tailored Brands (Men’s Wearhouse,  JoS. A. Bank), etc.

Another outstanding group of the Chapter 11 filers, vintage 2020, were the members of the Great American Oil & Gas Bust, such as Diamond Offshore, MC Dermott, Chesapeake Energy, California Resources, Denbury Resources, etc.

Among these larger companies, Chapter 11 filings, by sector, according to S&P Global:

  • Consumer discretionary: 125
  • Industrials: 84
  • Energy: 69
  • Healthcare: 57
  • Consumer staples: 34
  • Materials: 27
  • Real estate: 25
  • Information tech: 25
  • Communication services: 22
  • Financials: 14
  • Utilities: 6

But not included in the bankruptcy filing data are the many small companies that shut down quietly, with the owners working out deals with their creditors, landlords, banks, and credit card companies, without resorting to a bankruptcy filing. Many small retail stores, restaurants, and services businesses, such as hair and nail salons, fall into this category. Tens of thousands of restaurants are said to have shut down permanently due to the Pandemic.

How will all this unwind?

In terms of consumers, they either face a reckoning when forbearance programs and eviction bans expire; or they face an iffy situation where the can gets kicked further down the road, with further extensions of forbearance programs and eviction bans.

Even if landlords cannot evict tenants, they can sue them for past-due rents, get a judgement, and execute on that judgement with collection efforts, and tenants may see a bankruptcy filing as the only exit. So this mess may well get sorted out in 2021 in a way where consumer bankruptcy filings spike.

Some large businesses have hugely benefited from bailout programs under the stimulus packages, which granted tens of billions of taxpayer dollars to Corporate America – what we now call taxpayer capitalism, where taxpayer capital is transferred to corporate shareholders and bondholders. In particular, shareholders and bondholders of airlines have benefited from taxpayer capitalism, without which a good bunch of them would have participated once again in airlines restructuring their debts in bankruptcy courts.

It may be that policy has shifted to extend-and-pretend for evermore, that bailout and stimulus packages will follow in an endless chain. But I doubt that.

Somehow this will need to get unwound. Tenants will have to pay their rents or leave. Landlords will have to pay their mortgages or hand the buildings to their lenders. Homeowners will eventually have to make mortgage payments too, even if the mortgage is modified, or sell the home or send the keys to lenders. Airlines are now burdened by a huge mountain of debt, and they will have to figure out how to stop the cash burn and survive with that debt.

Cruise operators and other businesses whose revenues have collapsed to near-zero for 10 months have raised many billions of dollars in equity and debt capital under the easiest credit conditions ever, where yield-starved investors fell all over each other to fund them, and thus dodged having to file for bankruptcy. They now have more debts than ever, they have fewer ships, and practically no revenues yet, and they have to figure out how to survive this without filing for bankruptcy.

Movie theater chains and other entertainment venues fall into the same category, except they now face a structural shift: consumers and studios have switched to streaming – a move that has long been underway but sharply accelerated during the Pandemic. And the movie theater business may never come back like it was before.

There are many other businesses where the old normal has simply evaporated and the new normal is going to be very tough. This includes the office sector of commercial real estate, which is getting hammered by working from anywhere. Many employees will eventually return to the office, at least on a part-time basis, but companies have now seen the light: They don’t need this huge office footprint. And they can cut costs by reducing it. Restructuring that sector, which hasn’t even started yet, will take years.

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  41 comments for “How Will This Unwind? Amid Stimulus, Forbearance, Eviction Bans, Consumer Bankruptcies Dropped to Lowest in Decades. Commercial Chapter 11 Bankruptcies Highest in Years

  1. Heinz says:

    “Though 20 million people are still claiming state or federal unemployment benefits, the opposite happened in the Weirdest Economy Ever.”

    That is a shockingly high number claiming unemployment benefits, to be sure. And it is way out of whack with official estimates of people considered unemployed.

    U-3 unemployment rate was a 6.7% Dec 4 2020. Number of person unemployed was stated as 10.7 million (Nov 2020 figure).

    But as usual, the devil is in the details. Pandemic with all its unemployment assistance programs has made the difficult task of measuring national unemployment even dicier than normal.

    The GAO has faulted Labor Dept for faulty statistical processing that relies on ongoing state claims processed to represent the total claims. For example, each new week of unemployment appears as a separate claim, regardless if it is just one person with multiple weeks of claims being counted.

    GAO also notes that fraud is part of the problem (no-brainer there!).

    Statistics are apparently not gubmint bureaucrats strong suit.

    • Anthony says:

      From a stats point of view, look on the bad side to be safe…Maybe add the 10 million to the 20 million and get a true-ish unemployment figure of around 30 million….

    • K says:

      I am very worried about our country because I do not see this unwinding except with the economic equivalent of an explosion. Politics now can crush our economy indirectly if nationwide riots are starting. What happened today reminds me of the history of the politics of Weimar Germany, right before Hitler was imprisoned, wrote Mein Kampf, and then was released to gather popular support and get elected its chancellor.

      In my opinion, this is disturbingly looking like the beginning of fascism and the events are like those that happened in Weimar Germany: inflation is occurring and hyperinflation may occur later when the economy recovers somewhat and demand increases to meet the supply of most goods.

      Foreign investors love seeing national capitals taken over by mobs. That will want them to hold more dollars and invest in the buildings about to be burned down. (That was a joke.)

      Rule of law has been America’s greatest asset for centuries. Fascism and fascists are cancers in any nation like bankster parasites and like the communists in the CCP are cancers parasitizing China. Crushing these rioters will not kill the disease. All three groups are surprisingly similar in that they seek to enable a small group to rob and oppress the majority.

      Both parties contributed to this through corruption: e.g., allowing 15 billionaires to own all US media of any size per Forbes Magazine and create fake news, so each, separate media audience effectively lives in an alternate separate reality that does not match the other group’s alternate reality. We may be seeing the beginning of the economic chaos that will undo the US dollar and plunge our economy into a disaster.

      The good guys do not always win, America may lose its power and influence (Germany is already promoting an EU alliance with the CCP’s China) and the CCP’s tyrannical regime may become the most powerful in a coming, dystopian future. Read about the Mongols, Timur Lang, Mao, Stalin, Pol Pot, etc. Maybe, Merkel needs some organ transplants and wants some young, healthy, Uighurs killed by the CCP to get her some organs to live longer? OR, she could just want to keep the German auto factories in China profitable?

      • 32YO_Kid says:

        Excellent perception of this whole mess. I’d like add that I firmly believe that the rule of law in the U.S., is now in the hands of the billionaires by way of their media influences that alter the public’s perception on what is not acceptable. Essentially having so much money and influence they are redesigning society and culture to benefit them. Sad state of affairs.

        • Rainer says:

          Looking from Europe the US are or is becoming an oligarchy like Russia. For example the “social meedia” is closing the president´s account. So where is the real power?

          The proximity of european and us-politicians to the ccp is irritating. The US IS loosing it´s power for many reasons. One ist the greed of your oligarchs. Producing in China and selling in the US like Apple for example.

          Maybe four years are to short to steer a new road, but i think Trumps ideas were right. Now it´s to late. Demokrats have other ideas and i doubt they are the solution.
          Maybe some day people will regret the days of D. Trump are past.

  2. Martha Careful says:

    Re: “It may be that policy has shifted to extend-and-pretend for evermore, that bailout and stimulus packages will follow in an endless chain. But I doubt that.

    Somehow this will need to get unwound. ”

    This (pandemic) is not over, until fat lady sings beautiful tune.

    The new virus variant, including SARS-CoV-2 VOC 202012/01, 501Y.V1 or B.1.1.7 , isn’t really factored into any economic projections — yet. More than likely, the virus explosion in places like LA, are coming to any-town USA within a matter of weeks, at least in theory. The problem in LA shines a light on the smoking gun of hospitals being overwhelmed, deaths spiking and economic adaption, which probably will include shutting down cities.

    We haven’t seen the new variant yet, but as a result of stupid social behavior, we’re all about to enter a new phase of a nightmare, compounded by stupidity and more endless streams of tribal stupidity, where half the population helps the virus spread even more rapidly … did I fail to mention that stupidity will help spread SARS-CoV-2 VOC 202012/01, 501Y.V1 or B.1.1.7 ????

    Thus, I’d say there will be a lot more extend-and-pretend, because we’ll be faced with a decimating event that will take another year to unwind. I’m not even sure if we have vaccinated 1% of our population, but that entire effort isn’t going to win a race with B.1.1.7 and all the stupid people out there that want total failure.

    Don’t get me wrong, denial is a powerful thing and maybe people will buy into a recovery, but in order for that to work in a positive way, there will have to be more extend-and-pretend — otherwise, the wheels come off the happy bandwagon and everything turns super ugly.

    • Anthony says:

      B117 is only 1% different so the vaccine should work

      • Martha Careful says:

        It’s 1% today, but will explode here, just like in London and other places, sorta like what happened about last January, when people like trump were calling it a hoax. That small hoax has really made a mark! This new upgraded (meaningless) virus will shut down the country within a month, IMHO. I read a lot about thus stuff …

        see: “”The new strain is estimated to represent about 1% of all infections (in the U.S.) at this moment but because of its increased contagiousness, the best estimates are that it will become a majority of all new infections by March,” Dr. Ashish Jha, dean of Brown University’s School of Public Health, wrote in a blog post Tuesday.”

        • MarMar says:

          Anthony’s 1% refers I believe not to its prevalence but to the difference in DNA between it and the normal strain.

          The percentage difference is not as important as where the mutations are. From what I understand, most scientists believe that the UK (B.1.1.7) variant is close enough in the right ways to still be covered by the vaccine and prior immunity. The South African (501Y.V2) variant seems to have achieved partial antibody escape; in other words, the current vaccine and prior immunity are not guaranteed to prevent infection by it. But will probably reduce the chance of severe infection.

        • K says:

          Martha understood that and pointed out that it will explode: due to its reported UK R0 of 1.6 versus 1.1 for prior variants, that is foreseeable. The problem is that there are already other variants, e.g., a Nigerian variant reportedly.

          If I were president, since it will take months to see how bad they are and weeks to modify the vaccines, I would assume the worst and start adding more RNA for the new variants’ spikes to current spike-RNA vaccines being produced ASAP. Also, to achieve long term success, we must allow India and other countries with low costs to access and produce vaccines enough to vaccinate the world: otherwise, later on, mutations growing in some poor country might create much deadlier variants that then travel here.

    • Lots of people with a death wish, like the plague in the Middle Ages. The dance of death.

      • Ambrose, I don’t think the current spike in Covid-19,1,2,3 is necessarily due to coronavirus mutations, but due to the typical short memory span of many Americans. Forget the mask, forget the social distancing, forget the personal hygiene of handwashing & antiseptics, forget avoidance of large gatherings as we approach the One Year mark of government mandated behavior. May be too much to ask of a society that lives for the moment and thinks little of the future, near or distant. I think the Chinese plan to cull the world population is working better than expected.

      • rankinfile says:

        Ring around the Rosie
        Pocket full of posies
        We all fall down

  3. Weary Patience says:

    A quick eyeballing suggests consumer bankruptcy levels should jump *at least* 200k/yr higher when they take their finger out of the drain hole, no?

  4. polecat says:

    “How will this unwind?”

    Well.. right now in the District of Criminals, there a wholes Lotta ‘stimulus’ going on! … $hits gittin weird.

    “This is not the stimulus you’re looking for” ..”move along now”, said the Capital Storm Trooper.

  5. Bobber says:

    The Dems say getting $2000 stimulus checks out is their first order of business.

    If $2000 is good, why not $10,000? All they have to do is start a night shift at the printing press and maybe purchase some additional presses.

    Also, if they print $100 bills instead of the usual $20 bills, it would increase the pace of wealth creation by 500%. People could really use that money to pay down their debts, which would free them up to put more purchases on credit.

    • Yort says:

      I really wish they would bring back the $500 notes and $1000 notes taken out of circulation in 1969. It really is hard to buy things with cash of higher value, but perhaps that is the point?

      What I fear most about the global central banks creating digital currencies is the control over how we spend it, when we spend it, who gets negative rates, who gets positive rates, who gets more stimulus (winners), who gets less stimulus (losers), etc, etc, etc. And if you though American life was complex today, you will be shocked how crazy and comples it will get if the govt controls our spending and survival habits…

      When you merge Monetary and Fiscal forces with a govt controlled digital currency, you create what I call a “Behavioral Economic Incentive System”, which is anything but a free society and free markets…

      Hoping I’m wrong…yet I do believe we will see more economic, society, govt, healthcare, currency, and taxation changes in the next 3-5 years than we have seen in the last 30 years. It is going to be a wild ride…so pick and chose your time wisely as we all end up in the same “hole” in the end, the trick is to minimize the time spend in the rat race maze…

    • nodecentrepublicansleft says:

      Don’t you recall Trump advocating for $2K too?

      Have you noticed what other countries are doing for their citizens? Might want to put that in the Google Machine and you’ll see that a few thousand bucks is a pittance.

      • Swamp Creature says:

        Who cares what other countries are doing!!? This is the USA, the greatest country on the face of the earth. When you destroy the currency by promising the moon you destroy the country. Screw Google.

    • Swamp Creature says:

      ATM machines are and will start dispensing much larger amounts of cash. Noticed the screen on my Wells Fargo ATM now has a button for $1,000 cash w/d. Also the $500 button has been replaced by a $700 button. $20 bills have been replaced by $50 bills for large withdrawals. This is a sign that we are heady for hyperinflation a la Weimer Republic. Look for them to bring back the $500 bill very soon. Who’s picture was on that bill?

      I remember the “Gipper” had a campaign ad where he showed what $100 would buy at a grocery store if Jimmy Carter were elected. The grocery cart was nearly empty. We’re well on our way.

  6. Memento mori says:

    Dow up 500 points, move on, nothing to see, all hail Caesar Powell!

  7. The Politburo in Washington has stepped all over the legal system of the United States by willy-nilly modifying private contracts between landlords & tenants, mortgage lenders & homeowners, and practically every lender vs. borrower in the Land. The largest growth industry in the years ahead will be in courtroom attorneys, work-out specialists, and bankruptcy attorneys; wonder if these budding practitioners can obtain their certifications and licenses via online venues???


    Who is going to want to lend money, services, or goods to Americans going forward? And don’t give me the Cleanest Shirt at the Laundry analogy, we were a country founded on enforceable laws and we have cast that tradition and necessity aside for expediency and political gain.

    In the daisy chain of Who Owes Who What scenario we are currently sinking in, the question arises as to where the Buck Stops. It stops with the economic viability of our country to conduct normal capitalistic business day-to-day; a very dangerous precedent has been set that will set us back as a country to the Wild, Wild West mode of lawless operations. The guy or gal with the biggest stick or bravado will rule.

    The Debt Collapse is here. PLAN ACCORDINGLY, BUT THERE IS NO GUIDEBOOK FOR A COLLAPSE OF THIS MAGNITUDE. We need to get rid of the parties that self-servingly put us here out of greed for power/ money or via sheer economic stupidity.

    • And We The People are willing or unwilling parties to the crime. We now have Uncle Handout instead of Uncle Sam.

      • Stephen C. says:

        My only hope is that we may come to call our new President “Austerity Joe.”

        After all, he presented himself as Obama 2.0. And Obama turned out to be a big disappointment on the econ front for those on the bottom of the food chain (among other fronts.)

        • nodecentrepublicansleft says:

          But he didn’t start a bloody, expensive, generation long war for no reason (see Iraq).

          Nor did he botch a pandemic response like Trump did by politicizing the mask, calling it a ‘hoax’, saying it would go away, defunding the CDS team in China, ignoring the pandemic playbook, spending a YEAR on the golf course, spending 1/2 his day tweeting and the other half watching Fox “news”, etc, etc.

          So yeah, big disappointment except for being a sane, decent human being and rescuing the country from the biggest financial crisis since the Great Depression with ZERO help from the GOP. I wanted more too, but when half the Govt won’t help, it’s hard to get anything done.

  8. Yort says:

    So now Wall Street is long Insurrection and Anarchy? My portfolio went up 1.47% on a day that feels more like civil war and less like euphoria to me, but who am I to judge.

    At some point higher inflation, higher treasury yields, higher commodities…and a massively debased dollar will offset the infinite free money (M)agic (M)oney (T)ree/(T)rain that hits full force on January 20th, 2021…

    How will this “Unwind”? My best guess is quickly, unexpectively, and poorly for EVERYONE, including the top 1%ers AND the bottom 99%ers…

  9. MonkeyBusiness says:

    Dems just won the control the Senate. It’s 100K for everyone.

    Everything will be forgiven.

    It’s not going to be Debt Out the Wazoo anymore. Wolf will need to think about something new.

    • Carl says:

      Don’t they need 60 votes in the senate?? People say they will, they will but the still need 10 votes from the Rep, or is this wrong.

    • Carl says:

      Just a ruse they will give out money like candy to keep the sukers buying stocks t the top of hyper bubble, if the Rep don’t want it, it wont happen.

    • nodecentrepublicansleft says:

      Did you notice Trump and the GOP giving massive, permanent tax breaks to huge corporations and the 1% who did NOT need any more tax breaks?

      Did you forget to mention those trillions down the toilet or is it some the same tired claptrap about “boogie, boogie, boogies….the DEMs”.

      Considering the shitshow this country just suffered through…I’d expect a bit of humility considering the GOP and their clown prince teevee show host have an unmitigated disaster on every front. #reality

      Certainly you can do better!!!

  10. John says:

    Saw a headline in financial times, talk of debt forgiveness! Wow!

  11. polecat says:

    A one-time 2000 quatloo bag of goodies for every LowerMokestani with the Realm … as if that will stanch the fatal economic chest wounds of the millions ‘undeserving’ of genuine need … Whooptief#ckingdoo! But rest assured my lovelies .. the blu Hausians and redRhino Stenotorians will continue to vote-in THEIR perks, salary increases (Not to include the millions in LEGAL, for Them, insider-trading schemes …. plus Nancy’s gelato) in-house affordable-for-them, health services, conveying to and fro – to ‘fundraise’, on the taxdonkey’s dime, etc, etc, etc ….. as they lap up that luxurious Oligarch-derived jizz that continually drips down their chins!

    Pull the other one, Cold Nancy/Herr Schumer/singalong Mitch

    These people, are the absolute worst!

    • Happy1 says:

      BLM was “peaceful protesters” of course.

    • nodecentrepublicansleft says:

      How about 5 dead people? Does that matter to you?

      One was a cop and a veteran who supported DJT. One of DJT’s moronic mobsters hit the guy in the head with a fire extinguisher. He survived 2 tours in Afghanistan but not DJT’s imbecile mob.

      Or how about the poor woman with the “Don’t Tread on Me” flag?! She was a Trumper who was stomped to death by….that’s right, her fellow RED HATS!!! “Don’t tread on me!!!” was literally stomped to death by her own people!!

      So yeah…some dead people and a scene you would call a “Failed State” if you saw it in another country. Must be Biden’s fault.

  12. Yort says:

    Small Cap buyers are storming Wall Street as the Fed doused them with liquidity…HA

    Anarchy and Insurrection, Higher future Corporate Taxes, and tones of Civil War are Wall Street buy signals?

    Just imagine the GDP and Wall Street euphoria if an asteroid impacted Earth (house size, not 6 mile wide yucatan peninsula impact that wiped out 95% of all species)…you know, because in the end our Fed God will print us to salvation?

  13. Trinacria says:

    All so pathetic and tiring. Now a retired CPA and former college professor, I have been preaching for decades to folks, especially young people….make sure you have an emergency/rainy day fund – not very sexy but it is an insurance policy. But consumption is more important…stuff we don’t need, with money we don’t have to impress people we don’t like (G. Carlin) Well guess what, it has been raining heavily out there for a while now and will get worse. So, now they send “stimulus” checks in the mail. My immigrant parents would have been horrified. Indeed, we have met the enemy and….the enemy is us !!! Shocking as there is gambling in Casablanca after all !!!

  14. GotCollateral says:

    30Y UST yields have reach their march liquidation highs… if HQLA collateral valuations keep going down like this, it will most certainly bust the duration bubble that Jerome was talking about frbny purposely blowing in 2011

    • Yort says:

      Fed can do yield control just like Japan. I imagine the Fed can keep this crazy train moving faster and farther than any logical person could imagine.

      The Fed has turned our lives into real life video game, one in which they can download changes instantly to “debug” our natural behaviors and also to keep too many from “winning” or “losing”. Some will “opt-out”, others “have” stormed the capital instead, but a huge majority will be too lost to even begin to begin to understand why life in America is so financially difficult and unnaturally complex. Therein lies the rub…the govt controls the teaching of basic economics to economic uncaring citizens, and teach they do not, likely on purpose…

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