The coronavirus could cause record bankruptcy filings : The Indicator from Planet Money The COVID-19 pandemic is driving thousands of people and businesses into bankruptcy.

The Bankruptcy Question

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UNIDENTIFIED PERSON: NPR.

(SOUNDBITE OF DROP ELECTRIC SONG, "WAKING UP TO THE FIRE")

STACEY VANEK SMITH, HOST:

Jennifer Hensell is a tour guide in Philadelphia. She gives private tours to students, corporate groups, families. She's been in business for nine years. She's 41. She is passionate about history, and she really loves her job.

JENNIFER HENSELL: No tour of the historic area of Philadelphia is complete without including Independence Hall. Behind me, this modest brick building...

CARDIFF GARCIA, HOST:

Jennifer says she makes about $50,000 a year as a tour guide, but it's a funny business, she says. It's very seasonal. The winter's pretty dead, and the spring...

HENSELL: That's when we're starting to get our tours. That's when we're starting to pick up.

VANEK SMITH: But right when things were starting to pick up about a month ago, Jennifer got a call. It was a tour group canceling. And then she got another call and another call and another call.

HENSELL: Like, even just talking about it, like, my heart (laughter) - because I remember there was literally one day where I just had maybe three to four months worth of work just cancel on me, like, in one afternoon. I remember standing at the street corner at Fourth and Market, waiting for the bus and trying not to cry. Like, I'm not a crier, but it was just, like, I - it was just - I couldn't.

GARCIA: This business that Jennifer had built up over nine years was just gone.

HENSELL: Decimated is maybe the word that comes to mind.

GARCIA: And Jennifer's head started spinning.

HENSELL: Going like, how do I pay my rent? How do I pay my bills? Rent - I was like, OK, my landlord - he's actually a pretty cool guy. I could probably talk to him and work something out. Food - PB&J and ramen - I probably could manage.

VANEK SMITH: But Jennifer also had this other debt.

HENSELL: I have medical debt. I had surgery last year because I had a cancer scare. I have credit card debt, like most Americans, and it seems to grow faster than you pay it down.

GARCIA: That credit card debt and those medical bills totaled around $25,000. And with no income on the horizon and the tour industry just looking like it might be very slow to come back, that debt just started to seem overwhelming.

VANEK SMITH: As she was riding on the bus and more and more people were calling her and emailing her to cancel their tours, this word started coming into Jennifer's head; this word that seemed simultaneously like a huge relief, an escape hatch, and also terrifying and unthinkable; a word that now hundreds of thousands of people and businesses across the U.S. are thinking of right now - bankruptcy.

This is THE INDICATOR FROM PLANET MONEY. I'm Stacey Vanek Smith.

GARCIA: And I'm Cardiff Garcia. Today on the show, bankruptcy. The bankruptcy process can be confusing and emotional and expensive, but as unemployment in the U.S. moves towards 20% and credit card delinquencies rise into the millions, many businesses and individuals are seeing bankruptcy as their only option.

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VANEK SMITH: By the time Jennifer Hensell got off the bus that day in March, most of her income for the year had gone up in smoke, and she started to think about her situation. You know, the tour business did not seem like it was going to come back for a long time.

GARCIA: A lot of her debt was on credit cards, and that debt comes with a really high interest rate. Plus, her medical debt had been sold on to a debt collection agency, so the pressure to pay it was intense. She started thinking maybe bankruptcy was the answer.

HENSELL: And I started doing research, and it just got overwhelming - I'll be honest - because it's not - it felt like I was reading something in another language (laughter), and it was a language that I was not well-versed in. I try to think of myself as maybe average, maybe a little bit above average intelligence. And I'm reading these things, and it's just like - on one hand, it's like, oh, yeah, easy. But on the other hand, it's like, oh, it takes your credit. And I just kept going back and forth. It was like the cartoon where you have the angel and the devil on your shoulders, and they're both chiming in.

VANEK SMITH: A lot of people are wrestling with those particular angels and devils right now. Millions of Americans have skipped credit card payments, and companies have taken on a record level of debt. Many are now considering bankruptcy as a way out.

GARCIA: Amy Quackenboss is the executive director of the American Bankruptcy Institute, an organization that represents bankruptcy professionals. And she says that during the last economic recession, more than 1 1/2 million people a year filed for bankruptcy, and this recession could see even more than that. The insolvency industry, as she calls it, is exploding with demand.

AMY QUACKENBOSS: Bankruptcy professionals are overwhelmed with the number of calls and questions they're getting from businesses and individuals.

VANEK SMITH: Amy says the Bankruptcy Institute has been flooded with questions and has been trying to respond with lots of extra information and online courses.

QUACKENBOSS: We get usually on our webinars anywhere from 100 to 200 people. Our last webinar had over 1,000 attendees. So they are looking for - they're craving information. You just can't soak it up fast enough.

GARCIA: Amy says bankruptcy is confusing and emotional. It's also a double-edged sword a lot of times. On one hand, your credit score takes a big hit, and a bankruptcy will typically stay on your credit report for seven to 10 years, all of which makes it really hard to get a mortgage loan or a car loan or even a credit card.

VANEK SMITH: Also, bankruptcy usually involves selling anything you have that is of real value, like your house or your car, to pay down your debts.

GARCIA: But on the other hand, bankruptcy does stop the stress of collection agencies calling and taking your wages or repossessing your property. Generally, in a bankruptcy, your creditors want to sit down with you and work out a plan to pay off your debts over several years.

VANEK SMITH: Jennifer Hensell has been reading about all of this for weeks, and she says she cannot find a decision that feels totally comfortable. All these questions keep dogging her.

HENSELL: How would it impact my credit score? What if I wanted to buy a house? What if I wanted to buy a newer car? Like, what would it have in the long term? Then I started getting a different set of fears of - well, what if I do decide to do this and then our government does some program that I wouldn't have had to do it? That and then the scare of not doing it, not filing - there's that fear of, you know, like, not having any income coming in and having to pay bills to keep my lights on, buy food using credit cards and that interest rate just - you know, and having that grow.

GARCIA: Not to mention the stigma and the shame that can come with bankruptcy. Filing for bankruptcy is public, so employers and friends and family can find out about it. Jennifer says that also feels really scary to her.

HENSELL: It seems like so much of our worth is linked to our credit score. You hear corporations and businesses - oh, yeah, they filed for bankruptcy. Like, that's, like, commonplace. This is how you do business. But individuals doing it - there's, like, a stigma. Like, there's, like, the red B on your chest. Oh, you filed? You know, oh, you must be a failure. You must have bought too much avocado toast and too expensive pour-over lattes. You know, it's got, like, a value and a moralistic thing linked to it.

GARCIA: Jennifer says she's still not sure what she's going to end up doing, but she feels like the clock is ticking, and she needs to decide really soon. And her worries are even starting to invade her dreams.

HENSELL: Part of why I'm still drinking coffee at, like, almost 4 o'clock is I had a coronavirus nightmare last night in the middle of the night. I woke up, and I was just, like - you know, because I imagined zombies had broken into my apartment.

VANEK SMITH: Meanwhile, Jennifer is trying to pivot her business. She started writing a guidebook, and she's looking into virtual tours where people could walk around her historic city, learn about U.S. history with her while they were at home sheltering in.

HENSELL: This is where many of our Founding Fathers met to discuss and finally approve the Declaration of Independence. But most important of all, this is where the Constitution was created. This is the birthplace of all things of our nation.

GARCIA: This episode of THE INDICATOR was produced by Darius Rafieyan and fact-checked by Brittany Cronin. THE INDICATOR's editor is Paddy Hirsch, and THE INDICATOR is a production of NPR.

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