Navigating a case during the pandemic can be overwhelming. There are several types of bankruptcies, which require a lot of paperwork.
Some financial experts have expressed doubts about whether there will be a surge in bankruptcy filings due to COVID-19 in the next few months. Currently, there is a foreclosure moratorium on federally backed mortgages, which constitute a significant percentage of all mortgages. The government has also stopped student loan collections.
Additionally, there is a lot of support for state moratoriums on rent evictions and other debt collections. These initiatives are expected to reduce the immediate pressure for individuals to file for bankruptcy. However, in the long run, financial problems will accumulate, and the number of people who declare bankruptcy will increase.
Some researchers found that many people struggle financially for up to five years before deciding to file for bankruptcy. Usually, people wait and evaluate the impact of a financial storm before they go to a bankruptcy court. It makes no financial sense declare bankruptcy if debts are likely to continue increasing. As a result, the surge in bankruptcy filings is expected to occur after economic recovery.
There is no doubt that the severe interruption of the global economy due to the coronavirus pandemic has affected many households, resulting in unemployment and business closures. Many people have lost their regular income. Even if they get some money through unemployment insurance, they are still likely to fall behind on bills, loan repayments, and catering to their regular expenses.
Photo by rawpixel on Unsplash
It comes as no surprise that COVID-19 has left many households in financial trouble. Families that have been directly affected by the pandemic will deal with double the financial crisis. Other than income interruption, they are required to pay tens of thousands of dollars for medical expenses.
If hospitalized, the bills could rise to more than $70,000 in just a few days. Even with a valid health insurance policy, most insurers may require you to pay up to $20,000 of the total medical bills. Individuals without health insurance may pay up to $40,000 in a few days, even without hospitalization.
Studies have shown that many people have never investigated personal bankruptcy options seriously. Consequently, they believe bankruptcy is not helpful when overwhelmed by medical bills and other expenses. But the truth is that bankruptcy filing is a viable option if you need to repay such devastating debts.
Understanding the CARES Act
How will the CARES Act affect bankruptcies during the current crisis? There are new laws and reliefs, and many people don’t know whether they are eligible and how the coronavirus outbreak will affect their current status. The CARES Act became law earlier this year after being officially signed.
The primary objective of the new law was to offer financial aid and relief to citizens during the coronavirus pandemic. It includes relief worth about $2.2 trillion. It caters to areas such as unemployment and changes to the Chapter 7 and Chapter 13 bankruptcy filings. Which are the bankruptcy changes to expect after the signing of the CARES Act? Federal payments are not covered under the new law.
People with ongoing bankruptcy cases or paying into a case are required to provide a report of their income. Once you have done that, the income will be counted towards the required periodic debt payments. Note that stimulus payments are not categorized as disposable income and do not have an impact on the required payments.
Do You Need a Lawyer for a Bankruptcy Case?
Navigating a case during the pandemic can be overwhelming. There are several types of bankruptcies, which require a lot of paperwork. Therefore, going through the claims process may seem like a second job. Understanding the new changes will make the process more complicated for you. A bankruptcy attorney, like Bankruptcy Attorney – Murray & Murray, LLC, can help you understand the legal procedures and offer insights about which type of bankruptcy is the ideal for your situation.