Nebraska bankruptcy filings plummet for second-straight year
When bankruptcy filings fell nearly 20% in Nebraska in 2020, experts said it was likely a one-time fluke due in large part to federal stimulus programs and eviction moratoriums put in place to deal with the economic fallout due to the coronavirus pandemic.
Because of that, bankruptcy filings were expected to increase significantly last year.
Not only did that not happen, but filings declined by an even larger percentage.
In 2021, only 2,589 Nebraskans filed bankruptcy, a 22.5% decline over 2020. Since 2019, bankruptcy filings have fallen more than 37% to their lowest levels in decades.
The bankruptcy numbers in Nebraska were similar to what the nation as a whole saw in 2021, with total bankruptcies down 24%, according to the American Bankruptcy Institute.
“We are all just guessing about why the big decline has occurred,” said Sam Turco, a bankruptcy attorney based in Omaha.
Turco said he suspects a number of factors have combined to keep filings low, including extensions to emergency pandemic economic actions, such as eviction and foreclosure moratoriums, and deferments of student loan payments. Economic stimulus checks and advanced child credit tax payments also likely are keeping people from filing bankruptcy, he said.
The so-called “great resignation,” which involves record numbers of people voluntarily quitting jobs, is a factor, too, Turco said, because those who aren’t working don’t face wage garnishments.
“You file bankruptcy not when you owe debt but when collection of the debt hits the paycheck,” he said. “Until workers return to employment and face garnishments, bankruptcy rates will be low.”
While the drop in raw numbers is driven by a decline in personal bankruptcies, the category to see the biggest percentage drop was farm bankruptcies.
In 2021, there were 17 Chapter 12 bankruptcies, a 50% drop from the 34 filed in 2020. It was the lowest number of agricultural bankruptcies since 2016.
Creighton University economist Ernie Goss said stimulus programs also played a big role in reducing farm bankruptcies and keep business bankruptcies relatively steady, especially the Paycheck Protection Program.
Goss said supportive Federal Reserve policies, such as keeping interest rates low, also played a role in boosting the finances of businesses and farmers.
Another Fed policy — increasing the money supply by 35-40% — helped businesses and farmers, too, by reducing the value of the dollar, which made Nebraska farm products and manufactured goods more competitive internationally and led to higher sales, he said.
“Compared to the same period in 2020, U.S. exports of ag and manufactured goods for 2021 were over 20% higher,” Goss said.
For his part, Turco believes bankruptcies will start to rise sometime in 2022, especially if home foreclosures increase.
He said he’s also concerned about surging inflation, which hit a 40-year high of 7% in December.
“If inflation gets out of hand, we will face a severe economic problem similar to the late 1970s,” Turco said. “That is the big question looming over this economy — will inflation trigger higher interest rates and falling asset prices?”
The states where the most people worked remote because of COVID-19
States Where the Most People Worked Remote Because of COVID-19
About 30% of adults live in households with 1 remote worker
Higher income households were more likely to shift to remote work
MD and MA reported the most people teleworking due to COVID-19
13. New Hampshire
12. New York
4. New Jersey
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