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.