During the pandemic Whatcom bankruptcy filings have tumbled to record lows. Here’s why
Despite plenty of pandemic-related shocks to the Whatcom economy, bankruptcy filings in 2021 set a record low.
Last year, 155 bankruptcies of all chapters were filed in Whatcom County, according to data from the U.S. Bankruptcy Court Western District of Washington in Seattle. That’s down 25% from the 2020 total and down 47% compared to the pre-pandemic 2019. This drop in filings for Whatcom County follows state and national trends the past two years.
Last year’s total was the lowest in Whatcom County since 2005’s major changes to bankruptcy rules. The peak year was in 2010, when 808 bankruptcy filings were tallied.
With so much disruption in the labor market, particularly with pandemic-related shutdowns and restrictions, how were bankruptcy filings avoided? It appears the federal stimulus money, moratoriums on evictions and freezes on things like student loans helped, said Hart Hodges, co-director at the Center for Economic and Business Research at Western Washington University.
Other factors were also in play. Interest rates remained low, helping those who had debt or needed a loan. The pandemic also took away some temptations that might lead to overspending: While people may have splurged online with a bread maker purchase, they weren’t spending money on more expensive extras like destination vacations or eating out as often.
That drop in extra spending shows up in data, said James McCafferty, also co-director at Western’s research center. Credit card purchases and other revolving loan plans took a big drop at the beginning of the COVID outbreak and are still below pre-pandemic levels, according to Federal Reserve Economic Data. The business sector has also reacted similarly, with a big drop in commercial loans.
With so many federal assistance programs, moratoriums and freezes ending, there’s an expectation that bankruptcies will rise again in 2022, Hodges said in an email. The chances increase if the economic activity remains a bit bumpy with inflation and rising interest rates.
