Could the Coronavirus Pandemic Lead to More Bankruptcies?

Posted on March 30, 2020 at 8:00am by
Graphic of a crowd of people wearing masks due to the coronavirus

Life is changing for billions of people across the globe as coronavirus (SARS-CoV-2) continues to spread. Here in the United States, there is uncertainty over how a possible shutdown could affect businesses and consumers. In Italy, where authorities are testing thousands of cases each day, most businesses are shut down. An “Italy-style shutdown” is underway in parts of the United States. California recently ordered its residents to stay indoors, with some exceptions.

Depending on how the crisis unfolds, recent events could spark numerous personal and business bankruptcies.

How Could the Coronavirus Pandemic Affect Families and Individuals?

Medical debt is a factor in some bankruptcy cases. For people with chronic health conditions, or those who suffer a serious injury, they could face unaffordable medical bills. People in this situation are likely to have problems paying their other debts. The same could be true by the time the dust settles on the coronavirus pandemic. It could depend on what assistance, if any, lawmakers, insurers and hospitals offer.

COVID-19 treatment, especially inpatient treatment in a hospital, could lead to thousands or even millions of people accruing unaffordable bills. Testing for SARS-CoV-2 is only a small part of a much bigger problem. Medical debt could worsen financial issues for people affected by the pandemic.

Job loss will be a significant reason, perhaps the primary reason, why many people file for bankruptcy in the coming months. Workers in many types of industries may be unable to go into work, or may have job duties that have to be performed at a physical location. Depending on the success of recent legislation and how flexible creditors are willing to be with debtors, many of these workers may be unable to service their financial obligations. Many businesses are already laying off workers, and the rate of layoffs could continue to increase in the coming weeks and months. SARS-CoV-2 could bankrupt more people than it kills.

Unfortunately, job losses could make the overall domestic economic situation worse. People saddled with excessive debt may not be able to participate in the economy. This includes purchasing consumer goods and services. The same is true for people who cannot find work.

How Could the Coronavirus Pandemic Damage Businesses?

Many businesses are already feeling the heat from SARS-CoV-2. Businesses with physical locations are suffering immensely, and the current situation could go on for weeks or months. The same is true for businesses who cannot obtain the supplies they need to conduct operations.

While some businesses may be able to take advantage of proposed federal legislation, there are no guarantees all of them will come out of the pandemic unscathed.

Businesses affected by the coronavirus pandemic include:

  • Restaurants and bars
  • Catering services
  • Sports organizations
  • Airlines
  • Private transportation companies
  • Retail outlets (shopping malls and certain brick-and-mortar stores)
  • Dentists
  • Auto dealerships
  • Manufacturers (in some cases)
  • Casinos
  • Hotels
  • Certain schools and universities
  • Movie theaters
  • Food carts

This list could be much longer. Many businesses base their operations at a physical location and may have difficulty adjusting to a shutdown. Supply chain issues are also likely to lead to major issues for some businesses.

Uncertainty breeds economic chaos, and no one knows all of the possible short and long-term effects the SARS-CoV-2 pandemic is going to have on the business community. Even government assistance could be “too little, too late” for some businesses. A recent Washington Post article suggested that some small businesses could run out of funding before federal assistance arrives.

About Our Kansas City Business Bankruptcy Lawyers

The Sader Law Firm has experience helping businesses find options for debt relief. You can continue to follow our blog for additional updates on how coronavirus could affect the economy and business community. To schedule a consultation with us, dial (816) 281-6349 or use the contact form on our site.



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