SOUTHAMPTON, N.Y. — The coronavirus pandemic has caused severe fluctuations in the economy over the past year, pushing many businesses and families into financial uncertainty and in some cases outright collapse. Still, the number of national bankruptcies filed in 2020 was the lowest since 1986 and nearly 30 percent lower than 2019.
However, many experts expect foreclosures to increase in the coming years. The federal court system was shut down near the start of the pandemic, delaying cases for months. In addition, bankruptcies also tend to be “lagging indicators” of financial distress due to the complex legal process. The Great Recession began in 2007, but bankruptcies did not peak until 2010.
“You see these businesses that end up going bankrupt were probably in trouble six months or eight months or a year before they filed for bankruptcy,” said Fred McKinney, director of the People's United Center for Innovation & Entrepreneurship at Quinnipiac University in Connecticut.
Nationally, all types of bankruptcy filings declined in 2020 except for Chapter 11, which saw an 18.7 percent increase compared to 2019. Chapter 11 is typically used by businesses hoping to stay in business by renegotiating their debt . Several major iconic companies, including JC Penney and Neiman Marcus filed for Chapter 11 bankruptcy in 2020.
Across New York, 20,937 total bankruptcies were filed in 2020 — down 39.85 percent from 2019, when 34,810 were filed.
And in Suffolk County, 2,471 total bankruptcies were filed in 2020 compared to 5,062 in 2019, according to the Administrative Office of the U.S. Courts.
Businesses accounted for about 4 percent of all U.S. bankruptcies in 2020, but they can have a big impact on the economy as locations close and workers are laid off.
Businesses tend to depend on each other, and there can be an economic ripple effect that takes years to play out, said Neil Peretz, a lawyer with more than 15 years of experience in public and private sector bankruptcy cases. Peretz represented the public interest in major bankruptcy cases as an attorney for the US Department of Justice during the Great Depression.
“Every entity in the financial food chain is trying to hang on a little longer,” said Peretz, who now runs a company called Proxifile that helps small creditors negotiate the bankruptcy process when larger businesses fail. “Not everything can be stopped at once and people are still trying to solve this.”
Suffolk County Business Bankruptcies
Business bankruptcies in Suffolk County decreased last year: 130 business bankruptcies were filed in 2020 compared to 133 in 2019.
There were 49 Chapter 7 business bankruptcies, commonly referred to as liquidation bankruptcies, in Suffolk County in 2020. This is a decrease from 2019, when 103 businesses filed for Chapter 7.
All non-exempt properties are sold during a Chapter 7 bankruptcy, which can be used by both businesses and individuals.
Suffolk County had 81 Chapter 11 bankruptcies filed in 2020 compared to 30 in 2019.
Suffolk County Non-Business Bankruptcies
There were 2,341 non-business bankruptcies in 2020 compared to 4,929 in 2019.
Suffolk County had 1,732 non-business Chapter 7 filings in 2020 and 2,669 in 2019.
Chapter 13 bankruptcy filings, also known as “tenant plans,” were down in Suffolk County in 2020 compared to 2019. There were 603 filings in 2020 and 2,247 in 2019.
Chapter 13 is commonly used by people with regular income to reorganize and pay off debts over time. It gives people the opportunity to keep their homes.
