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Despite Pandemic, U.S. Personal Bankruptcies Reach Post-Reform Low

This commentary reviews the U.S. Personal Bankruptcies filings as a result of the Coronavirus Disease (Covid-19) pandemic. Recent data indicates that despite the nearly unprecedented levels of unemployment, the wave of personal bankruptcies never materialized.

Key highlights include:

-- DBRS Morningstar sees the data as illustrating the positive and protective impacts of the actions taken by federal, state, and local governments, personal spending decisions by households, as well as actions by a broad spectrum of financial institutions to support consumers during a national health emergency that created a short-term recession unlike any other in U.S. history.
-- The increase in savings, a demonstration of discipline by U.S. households during the pandemic, was another contributor in our view to the decline in personal bankruptcy filings.
-- While the data has surprised to the positive, DBRS Morningstar recognizes that an elevated level of uncertainty remains in the operating environment, given the spread of new variants of the disease that may lead to localized or even broader restrictions on economic activity, as well as the expiration of government programs providing forbearance on mortgages and student loan payments.

“While the actions taken by the federal government through the pandemic along with programs put in place by lenders have supported households through the challenging period since the onset of pandemic, we see a normalization in consumer asset quality metrics over the coming quarters along with a corresponding rise in personal bankruptcy filings.” said David Laterza, Senior Vice President, Head of Non-Bank FIG.