Bankruptcies plummet as Pennsylvania households benefit from COVID-19 assistance and pandemic savings
Bankruptcies plummet as Pennsylvania households benefit from COVID-19 assistance and pandemic savings

Bankruptcies plummet as Pennsylvania households benefit from COVID-19 assistance and pandemic savings

An increase in government emergency aid and household savings during the pandemic has helped ward off bankruptcies in Pennsylvania.

Both bankruptcy applications in Pennsylvania and across the country fell by about half between 2019 and 2021, according to the Administrative Office of the US Courts. The agency reports that non-business bankruptcies across the United States fell by 47% over the same period, while business bankruptcies fell by 37%.

Similarly, the clientele at South Side-based Advantage Credit Counseling Services has shrunk to historic lows, according to Heather Murray, the nonprofit’s director of compliance and community affairs.

“It’s definitely one of the aspects of the pandemic that we did not expect,” she said. “We expected consumers to struggle a little more financially, which in some cases they certainly are. But even in some cases, the pandemic has also brought them a level of financial stability. “

Advantage operates five offices in Pennsylvania, including one as far east as the Wilkes-Barre / Scranton area. It provides advice to consumers considering whether to file for bankruptcy, along with federally required financial management classes for debtors leaving bankruptcy.

“We’ve seen our prior counseling sessions drop dramatically over the last two years,” Murray said. At the same time, there has been a 44% drop in enrollments in the debtor training course that people must take before being released from their debt-voluntary debt. In 2019, about 1,550 households completed the course, compared to about 870 last year, Murray said.

She said Advantage usually advises people struggling with credit card debt. It has become less common for consumers to fall behind with mortgage payments, she said, in part because the federal government suspended housing auctions for almost a year and a half from March 2020. Pennsylvania has since Dedicated $ 350 Million in American Rescue Plan Funds to Help Homeowners Cover Mortgages, Taxes, and Utilities.

Murray noted that federal stimulus payments, increased unemployment benefits, the expanded child tax deduction and other COVID relief measures have further strengthened household finances. Increased savings have also helped, she said.

“Travel was virtually stopped for almost two years. People have worked from home, so you reduce your expenses outside the home – no commuting, no gas, no lunch out. Children’s activities were also greatly reduced,” she said.

As a result, Advantage customers who choose not to file for bankruptcy have become quicker to pay off credit card debt, Murray said. The nonprofit offers a service for consolidating and paying credit card bills.

“What we saw over the last two years [was that] the number of clients that one we put on the program has dropped, and then the number of clients who end their program early has increased significantly, ”Murray said.

However, she predicted that commitments are likely to increase again as COVID utilities end, and consumption is rising again.

“We are again seeing an increase in the number of crime with credit cards. So these are all indicators that consumers are somehow returning to their normal habits,” she said.

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