ALEXANDRIA, Va., and NEW YORK -

The ongoing year-over-year decline in bankruptcy filings because of the pandemic prompted experts to get creative to summarize the situation.

According to data provided by Epiq, the American Bankruptcy Institute (ABI) reported that total consumer and business filings fell more than 40% in January 2021 compared to the opening month of last year. The data showed total filings in January came in at 32,298, representing a 44% decrease from the January 2020 filing total of 58,160.

Epiq went on to explain that January generated the lowest monthly number of new bankruptcy filings across all chapters since February 2006 when the industry posted 26,617 filings.

While reiterating the year-over-year decline, Epiq added that the January bankruptcy filing statistics from its AACER bankruptcy information services business showed last month’s total also marked a 6% softening from December.

Breaking down the January filing amount, ABI and Epiq said consumer filings constituted 30,263 cases while commercial filings totaled 2,035.

Also of note, they pointed out that commercial Chapter 11 filings in January totaled 479, a 24% drop from the 631 commercial Chapter 11 filings in January of last year.

“Out of court solutions, available liquidity, and general uncertainty has caused a significant pause in Chapter 11 filings this past month,” said Deirdre O’Connor, senior managing director of corporate restructuring at Epiq. “We appear to be suspended in an air bubble at the moment.”

Chris Kruse, senior vice president of Epiq AACER, added in a news release, “The new year data continues to show extreme softness in new U.S. bankruptcy filings. The optimism around a new political administration and potential new government relief for consumers has kept new filings historically low.”

ABI mentioned the Small Business Reorganization Act of 2019 (SBRA), in effect as of Feb., 19, 2020, was enacted to provide Main Street business debtors with a more streamlined path for restructuring their debts. In response to the economic distress caused by the COVID-19 coronavirus pandemic, the  CARES Act was enacted on March 27, increasing the eligibility limit for small businesses looking to file under SBRA’s subchapter V from $2,725,625 of debt to $7,500,000.

ABI added the threshold will return to $2,725,625 on March 27.

“Continued government relief programs, moratoriums and lender deferments have helped families and businesses offset the challenges of elevated unemployment rates and growing debt loads during the COVID-19 pandemic,” ABI executive director Amy Quackenboss said in a news release.

“As further stabilization efforts are considered by Congress, an extension of the eligibility limit for small businesses electing to file for subchapter V under chapter 11 will provide vulnerable businesses with a proven shield in financially uncertain times,” Quackenboss continued.

ABI noted that the average nationwide per capita bankruptcy filing rate (total filings per 1,000 population) was 1.25 for January, a slight decrease from the 1.71 rate registered last January.

Experts also discovered the average daily filing total in January 2021 was 1,700, a 39% decrease from the 2,770 total daily filings posted last January.

Furthermore, states with the highest per capita filing rates (total filings per 1,000 population) through January included:

1. Delaware (4.88)

2. Alabama (3.06)

3. Nevada (2.48)

4. Tennessee (2.45)

5. Georgia (2.13)

When might this “bubble” disappear and a potential spike in bankruptcies arrive?

“We continue to expect new filings will grow substantially in the second half of 2021, notwithstanding any likely short-term stimulus,” Kruse said.