Noah Briles

St. Joseph attorney Noah Briles has handled personal bankruptcy cases for nearly 30 years. He said home foreclosures and high medical bills have always been a major cause of personal bankruptcy filings.

As a bankruptcy attorney for nearly 30 years, Noah Briles works with clients who struggle to keep up with medical bills or mortgage payments.

This year, another factor could fuel an increase in personal bankruptcies: the coronavirus. Filings in the U.S. Bankruptcy Court’s St. Joseph division increased 40% in the first seven months of 2020, from 110 last year to 155 in 2020. Most were Chapter 13 cases seeking reorganization of personal finances. Filings were down, however, in the western district that includes a much larger area.

Bankruptcy attorneys and financial counselors anticipate more bankruptcies, possibly in the second half of the year, due to rising unemployment and the end of relief measures designed to blunt the pandemic’s economic damage.

“Some of these things take a little while to hit,” Briles said. “People don’t immediately think of filing for bankruptcy. I think it’s eventually going to catch up for a lot of these people who have been out of work and are falling behind on mortgages and other payments.”

Heading into 2020, a booming economy might have masked the precarious financial position of some households. On the eve of pandemic, the Federal Reserve Bank of New York reported total U.S. household debt of $14.3 trillion, more than the previous high mark prior to the 2008 economic collapse. A separate Harris Poll found that just more than half of American adults don’t keep a household budget and 14% have more than $2,500 in credit card debt.

After the pandemic, economic uncertainty creates financial risk for those living paycheck to paycheck with high levels of debt.

“I think we are on the precipice of a major wave of insolvency,” said Bruce McClary, vice president of communications for the National Foundation for Credit Counseling. The organization provides information and links to nonprofit credit counseling for individuals who are considering bankruptcy or going through the process.

“There is going to be a bankruptcy bubble,” he said. “We need to be prepared for what will happen.”

The size of that bubble may depend on whether coronavirus relief measures like increased unemployment insurance benefits are extended. More than 4 in 10 of Missouri’s households include someone who lost employment income during the pandemic, according to Empower Missouri, an advocacy group for low-income Missourians.

“The common thought is there is going to be a rush of cases filed once the federal stimulus package stops,” said Todd Griffee, another bankruptcy attorney in St. Joseph. “People, we think, have been living off credit card debt for necessities like food and clothing.”

Briles said many of the consumer relief measures at the height of the pandemic granted moratoriums on making payments on utility bills, rent or mortgages. But they didn’t extend the loan or modify the terms, even if the consumer is behind on payments. That means the bill, quite possibly a big one, is about to come due.

“It’s kind of kicking the can down the road a little bit,” Briles said. “Unfortunately, it can seem worse than ever when you finally get to the end of that road.”

Briles has seen spikes in bankruptcies before, most recently immediately following the 2008 recession. Bankruptcy filings can track home foreclosures closely, with debtors seeking Chapter 13 restructuring in order to hold on to a house. The mortgage analytics company CoreLogic found that 7% of home mortgages were delinquent in May, the highest rate since 2014.

The rates of foreclosures and delinquencies can vary from market to market, but many homeowners are experiencing similar pressures.

“Whether it’s three months from now or six months from now, I think it’s going to catch up with people who are out of work and falling behind on mortgages and other payments,” Briles said.

Griffee said bankruptcies are cyclical, meaning that a significant surge in filings might not happen until spring, which tends to be the busy season.

“Filings are up substantially in March, April and May,” he said. “People are getting their tax refunds back and recovering from Christmas.”

Greg Kozol can be reached at greg.kozol@newspressnow.com. Follow him on Twitter: @NPNowKozol.

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