Ralph, an Uber driver warns bankruptcies in New Jersey expected to rise following COVID-19 unemployment
“I was getting my finances in order after divorcing my wife over a year ago. I was just about to start a consolidation program for approximately $30,000 in debt and I was bringing in income driving Uber and Lyft. “
“Then, the coronavirus pandemic hit and my income dropped to zero. Now, bankruptcy made more sense than consolidation.”
Ralph reduced his driving hours to protect himself from the infectious disease. It wasn’t like he was leaving money on the table. “There wasn’t any work anyway,” Ralph told me.
Ralph filed for bankruptcy on April 1 to eliminate all of his debt and, after talking to friends who also drive for Uber, thinks there will be a lot more people doing the same thing soon.
For some, if you aren’t able to pay your rent for a few months, even though the landlord can’t evict you right now, you are still going to have to pay the missed rent which may add to the financial pressures. Bankruptcy may be a tool that helps here as well.
“It’s just logical. Anybody who was thinking about bankruptcy before but thought they could get out of debt over time through debt consolidation or settlement is more than likely going to consider bankruptcy given the uncertainty of their employment and income.,” Ralph said.
I agree with Ralph, looking at a new spike in unemployment and remembering how the Great Recession caused a wave of bankruptcy cases from consumers seeking a reset after getting too far behind on debt.
Bankruptcy filings have dropped in recent years, but household debt has climbed.
Bankruptcies in New Jersey Expected to Rise Following COVID-19 Unemployment
There were more than 770,000 bankruptcies filed last year, according to court statistics. That’s less than half of the nearly 1.6 million cases filed in 2010 during the Great Recession. In fact, bankruptcy filings hit a 10-year low in 2018.
Americans had $14.15 trillion in household debt as of 2019’s fourth quarter, according to Federal Reserve Bank of New York data. For context, the recession-era peak was $12.68 trillion during the third quarter of 2008.
Now, all of the sudden, millions of people are out of work as the coronavirus forces consumers to stay at home to slow the virus’s spread.
Americans filed first-time jobless claims the last few weeks, in staggering numbers.
The sudden choke on cash flow, despite the ability to get a 180 day forbearance on mortgage payments, could still force people into foreclosure.
Business filings could start as soon as April with consumer filings to surge in May and June.
The increase could take a bit longer because in times of crisis, people don’t normally race off to file bankruptcy. But once reality hits, bankruptcy is going to be good option for many small businesses and individuals.
With all of this uncertainty, I agree with Ralph and believe Bankruptcies in New Jersey expected to rise following COVID-19 unemployment.