The novel coronavirus COVID-19 has had devastating implications across the globe, bringing the US economy to a grinding halt and placing millions of households in dire financial straits. For many Virginians, unemployment, stay-at-home orders, and shuttered businesses have led to an untenable situation, so you are not alone if you are considering filing for bankruptcy to ease the strain. Analysts at MoneyGeek.com, an online resource for information on personal finance, predict that a surge of bankruptcy filings is inevitable. Many people who were always on time in paying bills are finding themselves drowning in debt due to the impact of COVID-19.
If your financial condition has taken a hit, the time is now to consider your options with bankruptcy. To learn about what options are available based upon your personal circumstances, set up a consultation with a Virginia bankruptcy lawyer. You can also read on for how COVID-19 is affecting bankruptcy filings in 2020.
How COVID is Driving Bankruptcy Filings: It might surprise you to learn that bankruptcies are actually down compared to this same time period last year. However, the factors behind the decrease demonstrate that the uptick forecast by financial analysts could soon be a reality. For instance:
- Millions of Americans received federal stimulus payments through the Coronavirus Aid, Relief, and Economic Security (CARES) Act;
- Unemployed individuals received their payments under the existing unemployment insurance system in Virginia, and many qualified for extended benefits; and,
- The CARES Act provided for mortgage forbearance to certain borrowers, allowing them to stop payments for a designated period of time.
As stimulus funds are spent, unemployment runs dry, and borrowers will be required to start paying mortgages again, the bankruptcy rate could skyrocket leading into 2021.
Bankruptcy Options for Individuals: In the current environment of uncertainty surrounding COVID-19, it makes sense to consider bankruptcy before your debt situation becomes worse. Delays do little when you are already struggling, so taking prompt action can ensure that you see a brighter future sooner. There are two options to consider:
Chapter 7 Liquidation: With this type of bankruptcy, you can eliminate your debt after liquidating certain assets to pay creditors. Even if the proceeds of selling your assets is insufficient to cover what you owe, you will emerge from Chapter 7 bankruptcy debt-free. Note that a key qualifying factor is being able to pass the “means test” regarding your income. If you make a certain amount in disposable income, you may not be eligible for Chapter 7.
Chapter 13 Reorganization: You might consider this option if you have sufficient income to pay some creditors, but do not qualify for Chapter 7. This type of bankruptcy is termed reorganization because you will restructure your debts through the process and work out an affordable plan to repay creditors.
Benefits of Filing Bankruptcy: There is no question that there are consequences for declaring bankruptcy, which can affect your credit score for several years. Still, you need to balance this downside with the advantages:
- Bankruptcy gives you a fresh start after you conclude the Chapter 7 process or complete the terms of your Chapter 13 repayment plan.
- With late fees and interest rates, it is possible that you would never get out of debt – regardless of the COVID-19 implications.
- As soon as you file, creditors are prohibited from contacting you about your account.
A Virginia Bankruptcy Attorney Can Advise You on Your Options
For more information on filing for Chapter 7 or 13, please contact the Law Office of Steven D. Barnette, P.C. to set up a consultation. Our team represents clients throughout the Tidewater and Middle Peninsula area from our offices in Gloucester, Hampton, and Newport News, VA, and we are prepared to guide you through the bankruptcy process.