Why Aren’t Bankruptcies Surging In Southern Illinois?
If history tells us anything at all, it’s that we should be experiencing far more upheaval due to the current coronavirus pandemic than we actually are experiencing. Eastern St. Louis is one of the biggest cities in Southern Illinois, but law firms there aren’t seeing as many bankruptcy cases as they predicted when the pandemic first started. Why? The CARES Act didn’t provide nearly enough aid to prevent small businesses from going belly up, so what gives?
One lawyer with Carmody MacDonald PC, Rob Eggmann, said, “It’s not up like we thought they would be, quite frankly.”
Eggmann thinks it might have something to do with the fact that while some businesses have absolutely been hit hard by the pandemic, others have actually done better than they expected.
He said, “It never got to business as usual, but businesses were operating at a higher level here in the summer and fall, until things started getting shut down again.”
Others aren’t so sure. In order to even apply for bankruptcy, you need to be taking in at least some revenue. Partner Wendi Alper-Pressman at Lathrop GPM LLP said, “You have to operationally make money” to be successful even when you’ve failed. “And until such time, bankruptcy doesn’t really help them.”
This is because even bankruptcy has its costs: hiring a lawyer, for example.
And what seems to be the case in St. Louis isn’t necessarily the case all over the country. Statewide, Chapter 11 bankruptcies rose to levels comparable to a decade ago (in the midst of a big recession) after the stimulus funds were used. Using the same index to determine the number of big business bankruptcies filed since last year, we can see that they’re up about 26 points.
Had Congress passed new bailout measures to save businesses hit by the virus, many more might have survived. About 40 percent of recent bankruptcy applications have been turned in by businesses located in the southeast, including those in the states of Florida, Georgia, and Texas, where coronavirus cases have skyrocketed in the past few months.
Bankruptcy attorney Jeremy Johnson explained, “Although it’s difficult for anyone to predict what the economy will do the rest of 2020 and into 2021, we do anticipate filings continuing this momentum as we deal with the fallout from the pandemic.”
Potential good news is on the horizon, however. Should the coronavirus vaccine work as intended — and people actually line up to take it — then we could see a sharp dropoff in the number of COVID-19 cases by the middle of next year. Congress is also attempting to pass a new round of stimulus measures, which should help keep many businesses afloat.
This comes as new restrictive measures are being imposed all over the country as cases — and deaths — surge drastically. President-elect Joe Biden is expected to implement a mask mandate almost immediately after he is sworn in. Right now, many states have such mandates, but fail to enforce them.