A spike in government aid and household savings during the pandemic helped stave off bankruptcies in Pennsylvania.
Bankruptcy filings at once in Pennsylvania and Across the country decreased by about half between 2019 and 2021, according to the US Courts Administrative Office. The agency reports that non-commercial bankruptcies in the United States fell 47% over the same period, while commercial bankruptcies fell 37%.
Likewise, customer base for South Side-based Advantage credit counseling services has fallen to historic lows, according to Heather Murray, the association’s director of compliance and community relations.
“It’s definitely one of the aspects of the pandemic that we didn’t expect,” she said. “We expected consumers to experience a bit more financial hardship, which is certainly the case in some cases. But also, in some cases, the pandemic has also brought them a level of financial stability. »
Advantage operates five offices in Pennsylvania, including one as far east as the Wilkes-Barre/Scranton area. It provides advice for consumers considering bankruptcy, as well as federally required financial management courses for debtors emerging from bankruptcy.
“We’ve seen our pre-case counseling sessions drop dramatically over the past two years,” Murray said. At the same time, there has been a 44% drop in enrollment in the debtor education course that people must take before being discharged from their dischargeable debts. In 2019, about 1,550 households took the course, up from about 870 last year, Murray said.
She said Advantage generally advises people struggling with credit card debt. It has become less common for consumers to fall behind on mortgage payments, she said, in part because the federal government stopped foreclosures for almost a year and a half from March 2020. Pennsylvania has since earmarked $350 million in US bailout funds to help homeowners cover mortgage, tax and utility payments.
Murray noted that federal stimulus payments, increased unemployment compensation, expanded child tax credit and other COVID relief measures have further supported household finances. Increased savings also helped, she said.
“Travel was essentially halted for almost two years. People were working from home, so you cut your out-of-home costs – no commuting, no gas, no lunches out. Children’s activities have also been significantly reduced,” she said.
As a result, Advantage customers who choose not to file for bankruptcy have become quicker to pay off their credit card debt, Murray said. The association offers a consolidation and payment service for credit card bills.
“What we have seen over the past two years [was that] the number of clients that, firstly, we put on the program has gone down and then, secondly, the number of clients who finish their program early has increased significantly,” Murray said.
She predicted, however, that liabilities will likely rise again as COVID relief programs end and consumer spending picks up.
“We are again seeing an increase in delinquency rates on credit cards. So those are all indicators that consumers are somehow going back to their normal habits,” she said.