Could Bankruptcy Help You Financially Survive COVID-19?

State and federal governments have implemented a variety of programs and policies designed to help Americans survive COVID-19’s economic repercussions.

These programs and policies include:

Not one of these solutions, however, is long-term. Even the stimulus checks will replace only a month of fulltime, minimum-wage work, and not everyone will receive them. The pandemic, meanwhile, is expected to exceed a month—and the nation could feel subsequent economic damage for much longer.

If we knew the economy would recover within a few weeks or months, taking out loans or using credit cards would be a more viable solution. But no one is sure how long businesses will stay closed, how long consumers will stay indoors, or how the government will continue to support Americans.

The Benefits of Bankruptcy During COVID-19

Whether you are already struggling with debt or believe your debt will soon become unmanageable, you may benefit from Chapter 7 or Chapter 13 bankruptcy.

During COVID-19, bankruptcy would provide substantial relief because it would:

  • Trigger an automatic stay for the duration of the proceeding. An automatic stay halts all collection actions, including bank levies, wage garnishments, collection calls, foreclosure, and more.
  • Discharge your debt or reorganize it into a reasonable payment plan. This will allow you to focus on what’s most important (e.g. protecting the health of you and your loved ones, coping with the psychological stress of the pandemic, looking for alternative work, etc.).
  • Provide more flexibility for debtors than it would have before the pandemic. The CARES Act has modified the Bankruptcy Code to allow more debtors to qualify and, ultimately, recover from severe financial damages resulting from the pandemic.
  • Not consider COVID-19 related payments from the federal government (e.g. stimulus checks) as income or disposable income. Typically, your income dictates whether you qualify for bankruptcy as well as the payments you would need to make under Chapter 13. Per the CARES Act, stimulus checks and other forms of relief during the pandemic will not be included in these calculations.

Furthermore, those who have already begun Chapter 13 bankruptcy may be able to modify their payment plan if they suffer financial hardship as a result of the pandemic. This modification could include extending payments for up to 7 years after their first payment due date. This would lower the payment amounts and provide significant relief for debtors.

How Are Bankruptcy Courts Operating During COVID-19?

Most Bankruptcy Courts are still operational, although this may change as the situation develops. Currently, many procedures have become remote, and some courts have significantly relaxed certain requirements. For example, some courts have extended filing deadlines, and others have waived “wet” signature requirements, allowing people to file virtually via electronically reproduced signatures. If you intend to file bankruptcy, you may consider filing now, before more courts close.

Contact Us to See if Bankruptcy Is Right for You

At the Law Office of Seni Popat, we are working with clients facing unexpected challenges and unprecedented levels of stress. We are remaining open to help individuals financially survive the COVID-19 pandemic, and we are fully prepared to help you implement the solution you need during this uncertain crisis.

For a free, remote consultation, call (718) 340-3385 or contact us online today.

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