Dealing with the uncertainty of the coronavirus pandemic is especially challenging for those who are considering bankruptcy. Fortunately, many courts have loosened rules temporarily, making it easier for bankruptcy lawyers to represent quarantined clients. So, even if you’re in isolation (or social distancing) due to the coronavirus, rest assured the Law Offices of Parnell, Michels & McKay and our bankruptcy lawyers are ready to meet the challenge of helping you get out of debt.
Here are some items to keep in mind when exploring bankruptcy:
The Coronavirus Crisis: Financial Instability
Losing your job due to a layoff, closing your business, or taking a reduction in pay, means one crucial thing—there’s less money to pay the bills. No matter how much effort you put into turning down the thermostat, cord cutting or eating in, such measures come too late and rarely stop the pile of unpaid debt from accumulating.
Fortunately, local, state, and federal governments, along with many creditors, are working hard to provide some safety nets during the COVID-19 crisis. For many, deferred loan payments on your home, your vehicle, or other debt along with increased unemployment benefits will do the trick—especially when coupled with the mandated holds placed on evictions and utility shut-offs in many areas.
Even so there is an expiration date on all this assistance. Sadly, it’s unlikely that these measures will keep everyone afloat as the crisis continues. So, it is prudent to have a plan that assumes a best-case scenario while providing for the worst.
Be Proactive: Take Actions to Ease Debt
Current financial relief packages, such as deferred payments, can certainly help. However, the truth is that for many, government assistance will only be useful in the short term and will not go as far as most people will need. Furlough of payments will end, and the creditor will likely want all the payments at once. Evaluating the real impact on your finances will be crucial, and it is important to start planning now by:
- Speaking with your creditors. Knowing your current balance, the relief options available to you, and your interest rates are critical pieces of information to have, and will put you in a better position to plan. If you don’t have enough income to make all regular payments, consider deferring bills presently and setting aside the funds you’d use to pay those bills. You credit may be impacted if you defer payments unilaterally.
- Negotiate Debt. You may want to talk to an attorney before doing this, but it is possible that when it comes time to collect on your past-due balances that you may be able to negotiate a lower payment to settle the debt in full. Recent history is illustrative. After the economy crashed in 2008, money was tight for creditors, and they were willing to accept whatever they could get. The longer the coronavirus crisis last, more people will likely find themselves deeply in debt. Landlords and other creditors might be willing to adjust how much they’ll take in full payment (although you cannot count on it). Still, you might find an opportunity to settle with your creditors and avoid bankruptcy. However, if you chose this option, your credit score will likely take a big hit and your creditors can pursue you for payment and possibly bring suit. Additionally, if you find yourself filing for bankruptcy too soon after, lump-sum payments may be viewed as preference payments, which can lead to issues in your future bankruptcy filing.
- Negotiate Monthly Payments. Sometimes creditors will agree to accept smaller payments for a short period of time hoping that by the time things get back to normal you can resume your regular monthly payments. It will be very important during this time that you do not increase the amount you owe your creditors.
Protect Yourself: Hire A Bankruptcy Lawyer
Representing yourself during the coronavirus outbreak will likely be difficult, especially if you have ongoing health problems. By hiring a bankruptcy attorney, you are strengthening your financial team, and you begin a collaborative process to get you back on solid ground.
At the Law Offices of Parnell, Michels & McKay, our bankruptcy lawyers, Nancy Michels and David Stamatis, have been assisting fellow community members who have fallen on difficult financial times for a total of over 40 years. When facing a bankruptcy, we handle the two primary filing options under the bankruptcy laws: Chapter 7 Bankruptcy and Chapter 13 Bankruptcy. Each option offers clients benefits under its protections, but specific requirements must be met under each chapter. We will review your specific situation and file the case that will provide the most assistance. Bankruptcy may be right in some cases and not others.
Bankruptcy protection can provide immediate relief and give you a new beginning. It is important to consult with a bankruptcy attorney early on as unfortunately people make mistakes that could have been avoided if they had understood how bankruptcy works.
NOTICE: Pursuant to § 528 of the Bankruptcy Code, our law firm is a debt relief agency. We help individuals file for bankruptcy relief under the Bankruptcy Code.
At Parnell, Michels & McKay we specialize in personal injury law such as motor vehicle accidents, falls, dog bites, workers compensation, social security disability, and other injuries. We also practice family law, including divorce, post-divorce, unwed custody and property division, and collaborative divorce. We have extensive experience in bankruptcy, probate, boundary disputes, estate planning, corporate formation and other real estate litigation.