Fewer Chattanoogans are going broke this year, at least so far.
With bankruptcy court operations limited by the coronavirus this spring and government stimulus measures offering short-term relief to many, the number of bankruptcy filings in Chattanooga dropped in the first half of 2020 by nearly a third from the same period last year.
Despite a projected surge this year in business bankruptcies spurred by coronavirus shutdowns, the number of individual Chattanoogans seeking bankruptcy protection fell to less than half the number in the previous downturn during the Great Recession of 2008-2009, according to filings at the Chattanooga office of the U.S. Bankruptcy Court. Consumer bankruptcy filings were the lowest since the current bankruptcy rules were adopted in 2005.
Although unemployment jumped in Chattanooga during April to a post World War II record high of 13.3%, fewer people sought bankruptcy relief this spring. Economists credit the $2.2 trillion federal stimulus package adopted by Congress in response to the COVID-19 pandemic for limiting the economic dislocation caused by the shutdown of much of the U.S. economy. Aided by the most generous jobless benefits ever offered, unemployed persons this spring were given an extra $600 a week in federal benefits, boosting the average weekly jobless benefit paid in Tennessee to over $825 a week.
“As much as two thirds of those getting unemployment benefits had an income increase from being laid off (with the extra federal jobless benefits), so a lot of low-income persons who were hit hardest by the pandemic ended up being better off financially for three or four months and that resulted in fewer bankruptcies,” said Dr. Bill Fox, director of the Boyd Center for Business and Economic Research at the University of Tennessee. “That was a good outcome, but it’s not sustainable to maintain these levels of benefits for the long term.”