More than 7,200 of Maryland’s businesses and consumers have filed for bankruptcy this year, according to the latest data from the American Bankruptcy Institute (ABI), which covers the months of January through July.
Of those businesses and consumers 73% (5,274) filed for Chapter 7 relief (liquidation) and 26% (1,906) filed for Chapter 13 relief (payment reorganization).
Maryland ranks 42nd among states with the greatest year-to-year increase in bankruptcy filings.
States with some of the highest coronavirus positivity rates also had some of the highest increases in year-to-year bankruptcy filings. They include: Texas (11th), Florida (12th) and California (27th).
Cumulatively, Texas, Florida, California and Illinois which are the states with the highest number of COVID-19 cases in the U.S., account for more than 90,000 of the nearly 341,000 bankruptcies that have been filed in the U.S. and its territories so far this year.
“I’m not ‘surprised by the number of Chapter 7 filings,” National Federation of Independent Business (NFIB) state chair Mike O’Halloran said. “I’m disheartened because I would imagine that of the 5,274 businesses that have filed Chapter 7 so far this year, an overwhelming majority of them are small, ‘mom & pop’ businesses. They have been hit the hardest throughout this pandemic. You also have to remember that Maryland is very insulated when it comes to economic downturns. By that, I mean jobs, output, etc. are tied to the federal government’s budget – government procurement contracts, defense contracts, and the like.”
O’Halloran added: “So while it would seem like good news that Maryland is ranked 42nd in year-to-year bankruptcy filings, the reality is our small businesses, which employ 50% of Marylanders, are taking it on the chin. That is why it is paramount Congress secures near-term and longer-term financial assistance programs for the smaller businesses with continuing financial needs.”
Frederick County Chamber of Commerce President and CEO Rick Weldon, like O’Halloran, said he too is not surprised by the high incidence of bankruptcy filings in the state.
“I can’t say I’m shocked at the high number of financial reorganizations, but I can tell you I’m deeply worried about both the owners’ losses of investment and the impact on employees displaced by these closures. Now they’re having to worry about whether Congress possesses the will or ability to extend unemployment, which is the only way some of these folks can sustain themselves.”
Weldon said many of the businesses that were forced to close due to the pandemic are unlikely to ever reopen.
“The way it looks now if a business has yet to either reopen or at least reestablish their primary revenue streams, it’s unlikely they’ll survive. There are still several categories of businesses that have yet to be allowed to resume quasi-normal operations, like theaters (film and live performance), buffet-style dining, and large event venues and all of their associated vendors. Indoor recreation venues with challenges to social distancing are likewise impacted.”
Maryland Retailers Association President Cailey Locklair called the bankruptcy numbers “startling.”
“We need elected officials to intervene,” she said. “Providing some type of subsidy would help as this will continue to worsen with increases in costs to operate and less revenue coming in. I’m afraid some companies are being crushed as they try to dig themselves out of a hole they didn’t create.”
Locklair added: “Maryland has always been a “chain heavy” state and undoubtedly the effects of the shutdown, capacity restrictions and fewer customers, is drowning small businesses. Retailers are doing their best to innovate, but it is clear some will not make it.”
There are 93,005 confirmed cases of COVID-19 in Maryland as of Thursday morning, according to the state’s Department of Health, and 3,415 people in Maryland have died from the virus. The state’s positivity rate is at 4.03%. More than 1.3 million people in Maryland have been tested for COVID-19.
The stimulus package Congress is considering would make it easier for small business owners who declare bankruptcy to hold on to their companies.
State lockdowns aimed at preventing the spread of COVID-19 began in March.