Managing Debt Following Covid-19 Pandemic & How Bankruptcy May Help

TRI Writer • October 19, 2021

The recent pandemic, quarantines, and shutdowns have resulted in a wage of job loss, pay cuts, lost hours, and numerous other adverse financial repercussions for Americans; leaving many with debt following Covid-19. If you are struggling with debt in the aftermath of the pandemic, bankruptcy may help.

Is Bankruptcy the Right Move for You and Your Family?

If you are trying to manage debt following Covid-19 and struggling to make ends meet, filing bankruptcy may be a good idea. However, it is an extreme step and it isn’t the best step for everyone. Before you decide to file bankruptcy, consider other options available to you. Are you eligible for unemployment benefits? Have you looked into unemployment assistance in your area for those struggling financially as a direct result of the Covid-19 outbreak? Did you know the federal government has deferred student loan payments? If you have a private student loan provider, reach out to them to see if they offer any similar assistance. The federal government froze foreclosures and evictions involving certain properties for a limited time, and some state and local governments have their own protections in place assisting those in fear of evictions, utility shut offs, or foreclosures due to the financial difficulties originating from the pandemic. In fact, mortgage servicers and institutions holding credit card accounts, car loans, etc. may be willing to make adjustments to the terms of your agreement. Keep in mind that most of the assistance offered provides assistance through payment deferment rather than the elimination of debt.

When Bankruptcy Becomes the Best Option:

If you’ve already looked into all the options available to you and you cannot make your regular payments, then bankruptcy may be the best option. Bankruptcy does not eliminate all types of debt, but it does eliminate most types of debt. In particular, bankruptcy frequently eliminates the types of debt many consumers have accumulated due to the Covid-19 pandemic: credit card debt, missed rent, medical debt, etc. In addition, Chapter 13 frequently cuts thousands of dollars off your car loan and you still keep your car!

The Next Decision: Chapter 7 or Chapter 13

Once you determine that filing for bankruptcy is your best option, you need to consider which type of bankruptcy to file. Most individuals file either Chapter 7 or Chapter 13. Chapter 7, or liquidation bankruptcy, means that the trustee will sell any non-exempt assets and distribute the proceeds to creditors. Dischargeable debts are immediately discharged at the end of the bankruptcy process even if the creditor did not receive full (or any) payment. Before filing Chapter 7 bankruptcy, consumers must pass the means test to determine if they are eligible. If your job loss is recent, you may not be readily eligible to file Chapter 7 immediately as the means test takes the last 6 months of income into consideration.that said, if your lob loss is permanent, the Supreme Court has ruled we may be able to deviate from a means test (which presumes that filing a Chapter 7 would be abusive abusive) and as a result you could file a Chapter 7 anyway.

In contrast, Chapter 13 bankruptcy provides relief to individuals who can afford to pay back some of their debt within a three to five year time period. When filing Chapter 13, no assets must be sold to pay creditors, but all discretionary income is channeled toward a monthly payment to the bankruptcy court that is then distributed to creditors. Chapter 13 bankruptcy is typically a good option for filers with more financial resources. Chapter 13 takes significantly longer than Chapter 7 bankruptcy, but it avoids the loss of assets like a home or a vehicle.

If you have questions about filing Tennessee or Georgia bankruptcy and you want to discuss how bankruptcy can help you get out of debt following Covid-19, get in touch with an experienced bankruptcy attorney. Don’t hesitate to call Kenneth C. Rannick P.C., Tennessee, and Georgia bankruptcy attorney. We help good people through bad times.

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Subchapter 5 Bankruptcy: Unlocking New Possibilities for Tennessee Residents

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Are you a Tennessee resident facing financial challenges and considering bankruptcy? If so, you may have heard about a relatively new option called Subchapter 5 bankruptcy. But what exactly is Subchapter 5 and how does it differ from traditional Chapter 11 bankruptcy? More importantly, what benefits does it offer to individuals and small businesses?  In this blog post, we will explore the world of Subchapter 5 bankruptcy and shed light on its advantages for Tennessee residents. Whether you're a struggling entrepreneur or an individual burdened by overwhelming debt, understanding the potential benefits of Subchapter 5 can help you make informed decisions about your financial future. What is Subchapter 5 Bankruptcy? Subchapter 5 is a relatively recent addition to the United States Bankruptcy Code, specifically designed to provide a streamlined and cost-effective bankruptcy process for small businesses and individuals. It was created as part of the Small Business Reorganization Act (SBRA) in 2019, with the aim of increasing accessibility to Chapter 11 bankruptcy relief. The Benefits of Subchapter 5 Bankruptcy Simplified Process: One of the key advantages of Subchapter 5 is its simplified and faster bankruptcy process. Unlike traditional Chapter 11 bankruptcy, which can be complex and costly, Subchapter 5 offers a more streamlined approach that is better suited for small businesses and individuals. Retention of Ownership: Under Subchapter 5, business owners have the opportunity to retain ownership and control of their company while developing a repayment plan. This allows for greater flexibility and the ability to restructure debts without losing ownership interests. Reduced Plan Requirements: Subchapter 5 eliminates certain stringent plan requirements that are typically associated with traditional Chapter 11 bankruptcy. This simplification of the plan process makes it more accessible to small businesses and individuals. Debt Repayment Plan: Subchapter 5 allows for the development of a debt repayment plan based on the individual's or small business's disposable income. This plan spans over three to five years, making it more manageable and achievable for debtors. Creditor-Friendly Approach: Subchapter 5 encourages creditor participation and collaboration, promoting consensual resolutions and a more amicable environment. This can lead to increased cooperation, reduced litigation costs, and ultimately, a more successful restructuring process. Subchapter 5 vs. Chapter 11 Bankruptcy: Understanding the Difference While both Subchapter 5 bankruptcy and traditional Chapter 11 bankruptcy share some similarities, there are significant differences between the two. The primary distinction lies in the complexity, cost, and requirements associated with each option. Subchapter 5 offers a more simplified and accessible bankruptcy process specifically tailored to the needs of small businesses and individuals, while Chapter 11 is better suited for larger businesses with more complex financial structures. If you're a Tennessee resident grappling with financial difficulties, Subchapter 5 bankruptcy may provide a viable solution. Its streamlined process, reduced plan requirements, and debtor-friendly approach make it an attractive option for small businesses and individuals seeking relief from overwhelming debt. Before making any decisions, it's essential to consult with a qualified bankruptcy attorney who can guide you through the process and help determine the best course of action for your specific situation. Remember, bankruptcy is not a one-size-fits-all solution, and the outcome will depend on various factors. However, understanding the potential benefits of Subchapter 5 bankruptcy can empower you to make informed decisions about your financial future. At Kenneth C. Rannick, P.C., we specialize in bankruptcy law and can provide the guidance and support you need during challenging times. Contact us today to schedule a consultation and explore your options for a fresh start. Take control of your financial future with Subchapter 5 bankruptcy. Let us help you navigate the path to a brighter tomorrow.

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