Q3 Update: August Signals First Year-Over-Year Bankruptcy Increase Since Pandemic

Concerns about inflation and gas prices have dominated the news in the third quarter of 2022. These economic trends could be behind changes to a years-long trend in bankruptcy petition filings.

For the first time since 2020, the third quarter of 2022 has seen the end of year-over-year decreases in bankruptcy filings, reversing a trend that has persisted throughout the economic upheavals of the COVID-19 pandemic. The quarter saw just under 100,000 bankruptcy filings, as reported by Docket Alarm.

Legal analytics has shown that, month-to-month, bankruptcies spike in March and steadily decrease throughout the year, before spiking again the next March. Additionally, since 2020, every month has seen a decrease in bankruptcy filings compared to the year prior – the spikes in March, for example, have steadily decreased in magnitude. March 2020 saw over 60,000 cases; in 2022, it saw just 37,000.

The downward trend may indicate the success of economic measures like the Payment Protection Program and stimulus checks, accompanied by court and law office closures during pandemic-era lockdown measures. Regardless of the reason, bankruptcy filings remained low despite the massive economic upheaval of the COVID-19 pandemic.

This trend came to an end in the third quarter, over two years after the initial pandemic lockdowns. August 2022 saw 35,370 bankruptcy filings across all chapters, a small increase of about 2,000 over last year’s 33,315, or a 6% jump. September saw a smaller year-over-year increase of about 700 cases.

The year-over-year increase is small, but could be a leading indicator of a changing economic environment. the shift may indicate a changing landscape for debtors, as individuals and corporations increasingly consider filing for bankruptcy in the absence of other remedies.