Understanding the Impression of COVID-19 on Chapter Filings

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Petition to file bankruptcy; image by Melinda Gimpel, via Unsplash.com.

Navigating a case during the pandemic can be overwhelming. There are different types of bankruptcies that require a lot of paperwork.

Some financial experts have expressed doubts whether there will be an increase in bankruptcy filings due to COVID-19 in the next few months. There is currently a foreclosure moratorium on government-guaranteed mortgages, which make up a significant percentage of all mortgages. The government has also stopped collecting student loans.

In addition, there is great support for government moratoriums on rent evictions and other debt collections. These initiatives are expected to ease the immediate pressures on individuals to file for bankruptcy. In the long run, however, financial problems will accumulate and the number of liquidators will increase.

Some researchers found that many people have financial problems for up to five years before deciding to file for bankruptcy. Usually people wait and evaluate the impact of a financial storm before going to a bankruptcy court. It doesn't make financial sense to file for bankruptcy when debt is expected to continue to grow. As a result, the surge in bankruptcy filings is expected to occur after the economic recovery.

There is no doubt that the severe disruption to the global economy due to the coronavirus pandemic has affected many households, resulting in unemployment and business closings. Many people have lost their regular income. Even if they get some cash through unemployment insurance, they will likely still fall behind with bills, loan repayments, and covering their regular expenses.

Photo by rawpixel on Unsplash

It's no surprise that COVID-19 has left many households in financial trouble. Families directly affected by the pandemic will face the double financial crisis. Income disruptions aside, they have to pay tens of thousands of dollars in medical expenses.

At the hospital, bills could soar to over $ 70,000 in just a few days. Even with valid health insurance, most insurers can require you to pay up to $ 20,000 of total medical bills. People without health insurance can pay up to $ 40,000 in a few days, even without hospitalization.

Studies have shown that many people have never seriously investigated personal bankruptcy options. As a result, they believe that bankruptcy does not help if it is overwhelmed by medical bills and other expenses. But the truth is that filing for bankruptcy is a viable option when you need to repay such devastating debts.

Understand the CARES law

How will the CARES law affect bankruptcies during the current crisis? There are new laws and facilitations, and many people don't know if they are eligible and how the coronavirus outbreak is affecting their current status. The CARES Act became law after it was officially signed earlier this year.

The main goal of the new law was to provide financial aid and assistance to citizens during the coronavirus pandemic. It includes relief worth approximately $ 2.2 trillion. It deals with areas such as unemployment and changes in bankruptcy filings under Chapter 7 and Chapter 13. What changes in bankruptcy can be expected after the CARES Act is signed? Federal payments are not covered by the new law.

Individuals with ongoing bankruptcy cases or payments into a case are required to provide a report on their income. Once you do this, the proceeds will count towards the regular debt payments required. Note that stimulus payments are not classified as disposable income and do not affect the payments required.

Do you need a bankruptcy lawyer?

Navigating a case during the pandemic can be overwhelming. There are different types of bankruptcies that require a lot of paperwork. Hence, going through the claims process seems like a second job. Once you understand the new changes, the process becomes more complicated for you. A bankruptcy attorney like bankruptcy attorney Murray & Murray, LLC can help you understand the legal process and provide insight into what type of bankruptcy is ideal for your situation.