The coronavirus pandemic has had quite the impact on almost every aspect of our lives. It has upended the economy and had a major effect on everything from schools to work to how we do our shopping. It’s also resulted in significant financial hardships for many individuals, families and businesses.
But surprisingly, there hasn’t been a surge in bankruptcy filings. In 2020, the number of bankruptcies compared to 2019 fell by almost 30%. Whether this trend continues in 2021 remains to be seen.
If you’re thinking about filing for bankruptcy, you may be wondering when to file your bankruptcy petition. Should you do it now, even though the coronavirus is still a major concern? Or should you wait until the pandemic is mostly gone?
Unfortunately, there isn’t an easy way to answer either question. And any answer will be highly dependent on your specific circumstances. However, there are two questions to think about in deciding when to file.
The first question is if it’s safe enough to file. For example, if you file for bankruptcy, will you need to show up in court or visit your attorney in person?
The second question is if it’s financially wise to file for bankruptcy now or wait until the coronavirus pandemic is over.
In this blog post, we’ll examine both questions and cover some general guidelines and considerations to help you make the decision on when to declare bankruptcy.
Is it Safe to File for Bankruptcy?
It’s impossible to say for certain if filing for bankruptcy will somehow lead to an increased risk of contracting the coronavirus. But since the coronavirus pandemic in early 2020, much of the legal world has made changes to reduce the risk of spreading or contracting the virus.
Many lawyers will now meet with clients through video conference or telephone. They may also have special electronic means of sending and receiving documents that go beyond email attachments. In a pre-COVID world, they may have preferred an in-person consultation or for you to drop off physical documents at their office.
And many court proceedings have shifted to a virtual format. Exactly what the format consists of will vary from courtroom to courtroom. But assuming you need to attend an in-person proceeding, there’s a good chance you can attend virtually.
For instance, Chapter 7 bankruptcy has something called a “341 meeting of creditors.” Traditionally, these have occurred at a federal courthouse or other offsite location, with filers required to physically attend. But now, many of these meetings are held virtually. Each bankruptcy trustee will have its own rules on how they will hold the 341 meeting, so be sure to check with your specific trustee to know exactly how you need to attend.
The United States has been dealing with the coronavirus pandemic for well over a year now. For the most part, the bankruptcy process has been adjusted to take this new reality and everyone’s safety into account. Therefore, if you’re thinking about filing for bankruptcy, don’t let the fear of infection be the reason you decide not to file.
Will You Better Off Financially Declaring Bankruptcy Now or Waiting Until After COVID Is Over?
With or without a global pandemic going on, filing for bankruptcy should be an option of last resort. It costs money to go through bankruptcy (even without an attorney) and will significantly harm your credit history. So before hiring a Tuscaloosa bankruptcy lawyer, make sure you’ve exhausted all of your other options.
But the coronavirus has offered additional options and situations to think about or take advantage of. It’s the existence of these options that should make you think twice about bankruptcy. So before deciding if bankruptcy is right for you, ask yourself the following questions.
Do I Foresee My Financial Situation Getting Worse?
It might feel like you’re about to drown in debt, and perhaps you are. But have you really hit rock bottom financially? For instance, let’s say you have a massive amount of credit card debt and know there’s no way you can ever pay it all off because you just lost your job. Perhaps you could benefit from Chapter 7 bankruptcy discharging those debts. But are there any additional debts that may soon become a problem?
Maybe you’re not behind on your rent or mortgage payments now, but is it a reasonable possibility that you could see yourself facing a foreclosure or eviction for nonpayment of rent in a few months? If the answer to either question is “maybe,” it might be better to wait to file for bankruptcy so you can include any of those debts.
Remember, there are limits on how often you can file for bankruptcy. Depending on what you’ve previously filed and what kind of bankruptcy you’re trying to file for, there could be a waiting period of between two and eight years. The last thing you want to do is file too early, resulting in you missing an opportunity to have more of your debts discharged and having to wait several years before you can file again.
Can I Take Advantage of the Eviction Moratorium?
If you want to file for Chapter 13 bankruptcy in the hopes of avoiding an eviction by making up missed rent payments in your repayment plan, make sure there’s an actual threat of an eviction. As of the time of this writing, there is an eviction moratorium until about October 1, 2021. There are no plans to grant further extensions, but until the coronavirus threat is gone for good, anything is possible.
Do I Qualify for Emergency Rental Assistance?
The U.S. Department of Treasury offers an Emergency Rental Assistance (ERA) program. Administered through local agencies and programs, ERA is designed to help individuals cover the costs of their rent and utilities (including home energy expenses).
To find rental assistance where you live, you can visit the ERA program finder page where you can search based on your state, including Alabama.
Are My Creditors Willing to Work With Me?
When you’re behind on mortgage or credit card payments, many banks and credit card companies understand you and many others are struggling financially. This means they may be more willing than normal to cut you some financial slack.
For example, several credit card companies are offering a variety of debt relief options, such as:
- Lower interest rates
- Deferred monthly payments
- Late fee waivers
- Low or no interest balance transfers (a form of debt consolidation)
If you own your home, your mortgage company might have mortgage forbearance options. If you are going through a coronavirus-related financial hardship and have a federally backed mortgage (such as HUD/FHA, USDA, Freddie Mac or Fannie Mae) you may be eligible for a temporary pause or reduction of your mortgage payments. For most mortgages, this means the forbearance will not result in additional interest or penalties.
If your mortgage is with a private lender, you may still have comparable forbearance options available.
Am I in Financial Trouble Because of My Student Loans?
Absent the undue hardship exception, most student loans cannot be discharged in bankruptcy. However, the principal and interest payments for all federally held student loans have been suspended until September 30, 2021. So if you’re worried that you’re soon going to be unable to make your student loan obligations, you don’t have to, at least until September 30, 2021.
If you’ve already been taking advantage of this suspension in student loan payments, there’s a chance the suspension could be extended again. So it makes sense to wait and see if there will be another extension before filing for bankruptcy.
Still Not Sure on What to Do?
The coronavirus has certainly placed tremendous financial strain on many Americans, including residents of Alabama. But there are also many coronavirus relief and support programs available, many of which are unprecedented. So before filing for bankruptcy, it’s a good idea to first consult with a bankruptcy attorney. They can give you a better idea of whether it’s advantageous to wait to declare bankruptcy or if filing that petition as soon as possible is best for you.