The economic devastation of the pandemic in Utah has not triggered an increase in personal or business bankruptcies.
At least not so far.
On the contrary: The Hive State recorded 7,641 personal bankruptcies last year under Chapters 7 and 13, down 22.7% in a year of uproar and COVID-19 lockdowns by compared to 9,878 in 2019, when the state’s economy was booming.
Business bankruptcies remained virtually unchanged, with 20 Chapter 11 filings in Utah for all of 2020, up from 23 in 2019, according to the U.S. Bankruptcy Court.
The trend so far this year is even more downward, with 2,946 personal and business bankruptcies filed from January through June in Utah, up from 4,882 in the first six months of 2019 and 4,038 in the first. semester of 2020. These numbers have increased. slightly in recent months but still well below previous rates.
Bankruptcy lawyers say billions of dollars in congressional pandemic relief money – especially business payday loans and increased unemployment benefits – appear to have helped thousands of Americans avoid collapse financial.
“A lot of people were in a better situation than they even worked for a regular $ 13 or $ 14 an hour job,” said Aaron Nilsen, a personal bankruptcy attorney who runs the Utah Bankruptcy Clinic.
Personal deposits increased slightly in March 2020, but for more typical seasonal reasons unrelated to the pandemic, Nilsen noted. In fact, when his own practice saw an estimated 60% drop in cases during the year, he said, he had to lay off an employee and seek government assistance to keep his remaining staff on the job. payroll.
“We just got completely gutted when they made the mandatory shutdown,” Nilsen said.
In addition to government help, he and others noted, many Utahns who struggled financially during the health crisis have been kept out by limited moratoria on evictions, debt collections and wage garnishments, including student loan debtors and those who are behind on rent or utility bills.
Some of those benefits are expiring – at least in Utah – and that could explain the current rise in personal bankruptcies, Nilsen said. “A lot of these people are starting to feel the heat again, and that brings them back to our offices.“
Help under the Paycheck Protection Program has clearly helped thousands of Utah businesses stay afloat, judging by these bankruptcy trends. The state has averaged about two business bankruptcies per month under Chapter 11 through 2020, the same monthly rate as in 2019. This works out to about one filing per month so far in 2021.
Most importantly, the bankruptcy numbers overlook what are likely hundreds of Utah employers who shut down altogether during the pandemic without seeking creditors’ legal protection. A Federal Reserve study released in April estimated that the COVID-19 crisis forced up to 200,000 more U.S. establishments than usual in any given year to close permanently.
While this data is preliminary, Fed researchers have said that so far permanent business closures have been “likely lower than widespread expectations at the start of the pandemic.”
There is no precise tally of business closures in Utah due to COVID-19 so far, but the federal study indicates that personal service providers such as nail salons and Hair salons were among the hardest hit.
For mid-sized businesses, defined as having annual revenues of between $ 10 million and $ 500 million, Utah had the fewest bankruptcies filed in the first half of 2021 among 10 states in the Rocky Mountain region. Nevada, Washington, Arizona, Colorado and Oregon, meanwhile, are seeing deposits soar, in some cases with record numbers.
Utah’s deposits have also increased in recent months, but remain well below their usual levels. It’s another sign that the state’s economy continues to recover from the pandemic faster than the rest of the country.
But, according to an expert, it also indicates that the financial aid programs put in place during the pandemic have kept many companies from going bankrupt.
The paycheck protection program alone injected nearly $ 800 billion in forgivable loans to U.S. businesses before it expired in May, according to the Small Business Administration, of which nearly $ 277 billion was disbursed in 2021. .
Utah businesses have secured a total of nearly $ 5 billion in PPP loans, of which nearly $ 1.8 billion has been loaned to 32,814 Utah employers in the first half of 2021, according to the SBA statistics.
“The notion of fiscal stimulus has worked,” said Jerry Foster, president of Arizona-based Resolute Commercial Services, a consultant to mid-sized businesses in the Rocky Mountain region, “so credit the government for essentially avoiding what could have been a very terrible result. “
But Foster warned that the full impact of the pandemic on businesses may not yet occur, judging by trends seen after the Great Recession of 2009.
“It will take at least a year to see the real consequences of the pandemic on middle market companies,” Foster said, “especially in light of the influx of stimulus funds that many of them have received.”