AS I write this article, the country’s economic outlook is grim. The governor just ordered another shutdown of “non-essential businesses” who have already suffered significant financial losses since the pandemic started early this year. A lot of workers are getting laid off again by business owners who must shut their doors until being told it is OK to re-open. We are living in very difficult times. The good news is that we now seem to have the needed vaccines to put an end to this nightmare but how things pan out in terms of distribution and their effectiveness remain to be seen. We can only hope for the best.
COVID-19 has had crippling and devastating financial consequences for couples, families and business owners. We are seeing escalating unemployment numbers (20.6% currently) and a desperate need for financial assistance. Unemployment benefits run out by the end of this month and Congress so far has failed to come up with a relief package that can help people stay financially afloat at least for the time being. The longer the pandemic continues, the bigger the financial hole that people have found themselves in gets, and the more likely they will turn to filing bankruptcy as a way to get needed relief from their crushing financial burdens.
No one ever plans to go bankrupt, but the current situation is forcing people to consider it as an option if their financial security is threatened by the lack of sufficient income to pay even for life’s necessities. For most, it is pushing a financial reset button.
Unlike what others might think, people do not use bankruptcy frivolously as an easy way out of debt. Often, they are triggered by major life events that significantly reduce their income, their debt, or both. Examples of such events would be divorce, unemployment, disability or death of a partner. The financial crisis caused by COVID-19 is also one such event because it has severely impacted all our lives in ways we have never imagined.
For individuals, there are two main types of bankruptcy. Chapter 7 allows you to wipe out debts you can no longer pay, although there are a few exceptions such as student loans, most taxes and domestic support obligations. Chapter 7 is typically for those whose income is so low that they are not even able to pay for basic living expenses. On the other hand, if a payment plan was possible, Chapter 13 allows you to consolidate all your bills over a 3-5 year period. What makes Chapter 13 the best type of debt consolidation is the fact that your monthly payments are often just based on how much you can afford, regardless of the total amount of your debts. Whatever is left at the end of the repayment period is simply wiped out and you can be 100% debt-free much faster than if you tried to pay all your creditors on your own. The interest rate on credit cards and unsecured loans also drops down to zero, a far cry from the outrageous 23-29% interest rates that you may be currently paying. With either Chapter 7 or 13, you also get the full protection of the law which means that creditors will not be able to pursue their usual remedies of obtaining a judgment, a bank levy or a wage garnishment in order to force payments from you.
Filing bankruptcy does not mean giving up your possessions, a common misconception that people have. An experienced bankruptcy attorney can help explain the exemption laws and how they apply to your property and assets so that you can have peace of mind knowing that you will not lose everything you have worked so hard for.
The pandemic will end eventually, but until we know when that is, personal incomes will continue to suffer. The bankruptcy courts are still open, and you can still file bankruptcy at this time if that is an option for you. In some cases, it may be best to wait if there are good reasons why you should delay. But at the very least, as a bankruptcy attorney, I think you should at least be pro-active in seeking legal counsel about your situation in case bankruptcy becomes inevitable for your situation.
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NOTE: Due to the current lockdown order caused by COVID-19, I am offering free consultations BY PHONE to anyone who needs help in dealing with their debt problems
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None of the information herein is intended to give legal advice for any specific situation. Atty. Ray Bulaon has successfully helped over 5,000 clients in getting out of debt. For a free attorney evaluation of your situation, please call RJB Law Offices at TOLL FREE 1-866-477-7772