Regarding bankruptcy being similar to a tsunami, I see this as a highly accurate analogy, as will be discussed below.
What do people need to know?
Historically, our most recent economic downturn is the financial crisis of 2007-2009. The bankruptcy numbers that follow that crisis can be informative of what to expect here. Previously, bankruptcy filings peaked in 2010. Looking at Chapter 7 bankruptcy, which is the most common form of consumer bankruptcy, the number of filing per year trended as follows:
Source American Bankruptcy Institute
This tells us that much like a tsunami, the wave of bankruptcy will be powerful, but also relatively slow moving. The reality is that many people are able to last months or years after an economic disaster before filing bankruptcy. In addition, if the losses are still ongoing such as during unemployment, it might make sense to file once things are in a better place.
How can you prepare?
My best advice is to consult early with a trusted bankruptcy attorney. There is no reason to wait until things become acute. Most attorneys, much like our law firm, will offer free consultations. In other words, set a free consultation with a trusted attorney now so that you know where things stand. That way you have the lay of the land and you can best protect yourself and your family.
And how drastically will the system be taxed?
The bankruptcy courts will become more and more busy, but this is a tsunami, meaning a powerful slow moving wave instead of an immediate explosion. Many people can last month or years before a bankruptcy becomes inevitable. Depending on how things go with the economy, we might not see the peak of the wave until 2022 or later. I expect the courts will be able to adjust, and have likely already started to hold meetings in preparation for the coming wave.