COVID-19 FINANCIAL ISSUES...CAN BANKRUPTCY HELP?
Updated: May 28
Less than three months ago, terms like quarantine, stay at home order, and social distancing were not part of our daily life. Now they seem inescapable. Aside perhaps from the few of us who are deemed to be essential workers, the economic impacts of the COVID-19 shutdown have affected us all. Whether from a job loss or layoff, forced shutdown of your small business, or simply reduced hours due to working from home, most of us have experienced an adverse impact on our monthly income. While this impact has been lessened somewhat by stimulus payments and federal loan programs such as the Payroll Protection Program and the Disaster Assistance Loan Program, these programs only offer a limited amount of funding for a limited amount of time.
Thankfully, many financial institutions have shown some leniency. Most mortgage companies are offering three month payment suspensions, and several credit card companies and lenders have offered temporary deferments. Similarly, banks and lenders are somewhat hampered in their ability to file lawsuits, garnishments, and foreclosures due to the partial court closures.
Like the stimulus payments however, these are only temporary remedies and not permanent solutions to the financial issues caused by this crisis. Once the suspensions and temporary deferments run out, most of the banks and lenders will likely be looking for the deferred payments in a lump sum, under the threat of foreclosure and garnishment. Courts are already beginning to reopen, and there is expected to be a large influx of backlogged collection lawsuits, foreclosures and garnishments that will be filed as soon as the court system is fully operational again.
The reopening of the economy is occurring slowly. If things continue along their current trajectory, individuals and small businesses will be facing a perfect storm of reduced income, depleted savings, past due payments, and increased threat of legal action. Fortunately, potential solutions to many of these problems can be found in Bankruptcy Court.
Everyone’s situation is different, and bankruptcy is not a silver bullet for all problems, but it is an effective tool in giving individuals and small businesses the breathing room necessary to achieve a fresh financial start. Here are five ways that bankruptcy can help with financial issues caused by COVID-19:
1. BANKRUPTCY STOPS CREDITOR HARASSMENT AND LEGAL ACTIONS AGAINST YOU. Filing bankruptcy gives you the protection of what is called the “automatic stay.” This means that, in the vast majority of cases, creditors cannot foreclose, garnish, repossess, sue or even make collection calls to you once you file for bankruptcy.
2. BANKRUPTCY ELIMINATES, HIGH-INTEREST, UNSECURED DEBT. Through bankruptcy, you can discharge most unsecured debt, such as credit cards, finance company loans, payday loans, and medical bills.
3. BANKRUPTCY CAN HELP YOU KEEP YOUR HOME. Bankruptcy can stop the foreclosure sale of your home and allow you to catch up on your mortgage payments through a court ordered payment plan, while you stay in your property.
4. BANKRUPTCY CAN HELP YOU PAY LESS FOR YOUR VEHICLE. Depending on your loan, it is often possible to keep your vehicles while reducing the loan balance and interest rate on vehicle loans through a bankruptcy payment plan.
5. BANKRUPTCY CAN GIVE YOU BREATHING ROOM WHILE YOU GET BACK ON YOUR FEET. Once you file bankruptcy, your creditors have to leave you alone. You can either seek to eliminate your debt through a chapter 7 or restructure your debt through a chapter 13. It can help you work towards a fresh financial start while you are looking to return to work or getting your business back up and running.
Every situation is unique.Whatever you are facing, don’t ignore it, get the information you need to face it head on.I am available to speak with you about the specifics of your circumstances and your potential options, without cost or obligation.Visit www.andresslawfirm.com for more information.