Despite Pandemic, Bankruptcy Filings Fell By 21% In FY 2020

By Kevin Penton
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Law360 (October 30, 2020, 8:24 PM EDT) -- Business and personal bankruptcy filings in the United States fell by 21.1% during the fiscal year that ended in September, with the federal government speculating that the impact of the coronavirus pandemic has yet to be reflected in the figures, according to statistics released Friday by the Administrative Office of the U.S. Courts.

The total number of bankruptcy filings for the 12-month period that ended on Sept. 30 was 612,561, down from 776,674 filings during the previous 12 months, according to the statistics.

The drop was largely attributable to the subcategory of non-business filings: While business filings fell by 2.2%, to 22,391, the number of non-business filings plummeted by 21.7%, to 590,170, according to the government's statistics.

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The drop in non-business filings would appear at first glance to be counterintuitive, given the rise in unemployment numbers in the wake of the COVID-19 pandemic. But the administrative office believes that filings may have been depressed in part by the limits on public access to bankruptcy courts since March, according to its announcement. The worst may still be to come, it said.

"Bankruptcy filings tend to escalate gradually after an economic downturn begins," according to the announcement. "Following the Great Recession, which began in 2007, new filings escalated over a two-year period until they peaked in 2010."

An exception to the decreases were Chapter 11 filings, which increased by 12.3% during the period, to 7,981, according to the statistics.

Law firms in recent months have worked to strengthen their bankruptcy practices and related areas in anticipation of an increase in commercial filings.

Ice Miller LLP on Oct. 1 announced its launching of a distressed investment group geared to assist clients with matters such as acquisitions of struggling companies, investments in bankruptcies and in-court and out-of-court restructurings. The group is made up of existing Ice Miller attorneys, including corporate restructuring, finance, real estate, tax and mergers and acquisitions attorneys.

Also on Oct. 1, Scott Cousins, who had most recently been a director at Delaware-based Bayard PA and who was previously a former partner of Chipman Brown Cicero & Cole LLP,  launched his own bankruptcy-focused law firm called Cousins Law LLC

The new firm will focus on representing troubled public and private companies, creditors and creditors' committees, boards of directors, management and shareholders in all aspects of business reorganizations, restructurings, workouts and liquidations, including expedited, high-stakes litigation and commercial transactions related to distressed acquisitions and sales inside and outside Chapter 11, the firm's announcement said.

Firms are also adding lateral hires in the bankruptcy and restructuring space. Some firms that have hired lateral bankruptcy partners in the last month include Morrison & Foerster LLP, Sheppard Mullin Richter & Hampton LLP, Katten Muchin Rosenman LLP, Winston & Strawn LLP, Morgan & Morgan and Nelson Mullins Riley & Scarborough LLP.

--Additional reporting by Aebra Coe. Editing by Alanna Weissman.

Clarification: This story has been updated to clarify when Scott Cousins left Chipman Brown.

For a reprint of this article, please contact reprints@law360.com.

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