Considering Bankruptcy Due to the Coronavirus? Read this First!
To date, over 22 million Americans have filed for unemployment due to economic challenges brought upon by the coronavirus outbreak. Yet, for some Philadelphians, or any other residents across the country, the government aid package may not be enough to cover their expenses and pay off outstanding debts. Many individuals are considering filing for bankruptcy instead.
In a recent interview with CNBC news, our very own George Tadross discussed the implications of filing for bankruptcy and everything individuals should consider beforehand. Below are some of the things that were covered in the interview.
Did You Consider All of Your Other Options?
Bankruptcy should be your last resort after you’ve exhausted all of your other options. Not only does it have long-term financial consequences, but you also won’t get quick relief as most courthouses are closed due to the coronavirus outbreak. Luckily, you may have alternative options available that can help alleviate your financial burdens during this difficult time.
If you’re juggling debt from a lot of different sources, take a moment to prioritize your bills. Are there any accounts where you can make the minimum payments required, such as credit card bills or student loan payments? If so, focus on paying as much as you can at the moment until you land back on your feet.
Don’t be afraid to contact your lenders if you need extra assistance. Right now, many financial institutions are offering relief programs to borrowers who can’t fulfill their obligations. For example, qualified homeowners can request a forbearance on their mortgages, or new graduates can defer their student loan payments for the time being. Make sure to speak with your lender before you incur any late charges.
Don’t wait to take full advantage of these programs, as they won’t last forever. If the program ends but you require further assistance, speak with your lender about long-term relief options. Our debt negotiation lawyers can also help you negotiate for lower interest rates on your mortgage or take a settlement on your credit card debt.
What Type of Bankruptcy is Right for You?
Bankruptcy is not one-size-fits-all. There are different procedures available, and one of them may be the best option for you.
- Chapter 7 Bankruptcy: If you have a substantial amount of unsecured debt that you are unable to pay back, you should file for Chapter 7 bankruptcy. Any loans that are not backed by collateral, including medical bills and credit card dues, are considered unsecured debt. When you file for Chapter 7, a judge will issue a federal injunction that automatically stops creditors from collecting, and assign a bankruptcy contractor to review your case. The contractor will liquidate any nonexempt properties and valuable assets, using the money generated to pay back your creditors. Once everything is approved by the judge, your debt sheet will be scrubbed, and you’ll be free to start anew. Chapter 7 bankruptcy cases typically last between three to five months.
- Chapter 13 Bankruptcy: Also known as the “wage earner’s plan,” Chapter 13 bankruptcy allows individuals to restructure their debt without giving up any valuable assets. To qualify, you must meet a strict set of criteria that shows the courts you’re a good candidate. If the judge approves your claim, you’ll be working alongside a bankruptcy trustee to pay back your outstanding debt to the best of your ability. Once you have successfully completed your repayment plan (usually between three to five years) and met all other court-mandated requirements, the remaining debt will be discharged.
Keep in mind that there are filing fees associated with each bankruptcy case, though there are payment plans available. Any form of bankruptcy must be approved by a judge to be considered valid. Take into consideration that most courthouses are closed for hearings at the moment, and proceedings are being held remotely. This will impact how quickly your bankruptcy claim is reviewed by the court.
Need a Trusted Lawyer By Your Side?
Filing for bankruptcy is no easy feat. It’s a painstakingly laborious process with tons of complicated paperwork and filing procedures. Unless you’re 100 percent confident that you can complete everything correctly by yourself, we recommend reaching out to one of our Philadelphia bankruptcy lawyers for help. Schedule a FREE consultation, where one of our esteemed attorneys can review your case and give you a professional option. All communication will be done remotely as our Philadelphia office is closed for the time being. Contact us today for further information!