As we pass into our second year of the COVID-19 global pandemic, outlooks remain uncertain for thousands of families and individuals. While many people who were laid off due to COVID have now returned to work, there are still roughly 9.5 million fewer jobs now than there was this month a year ago.

The future, for now, remains uncertain, and people who lost income through the pandemic are still unsure what to expect. Because of this, many people find themselves significantly behind on bills and looking for a solution. So, if you have lost income due to COVID, should you be considering bankruptcy as a solution?

Exploring Your Options

Before thinking of bankruptcy, see if there are other ways to regain your financial stability. Under the CARES Act, there are some protections that can help people who have lost income due to the pandemic. Both foreclosures and evictions have been suspended. Borrowers can ask for up to 180 days of forbearance on their mortgages.

If you are unable to keep up with payments on your credit card, mortgage or other loans, contact your lender to discuss the situation. Some may be willing to lower payment amounts, suspend late fees, or restructure the loan.

However, even when debts are put into forbearance to avoid default, payments will be due eventually. In some cases, past due payments may be expected all at once when any hardship programs expire. If you are still unable to pay, it may be time to consider other options.

Should You File for Bankruptcy?

If you foresee an inability to continue to pay debts, especially unsecured debts like credit cards or medical bills, bankruptcy could be an option. There are two types of bankruptcy that are typically used by individuals. Chapter 7 erases all your debts. However, you may have to turn over assets to a bankruptcy trustee to satisfy whatever debts are possible before other debts are written off. With Chapter 13, you are able to hold onto assets, but the debt is reorganized instead of eliminated.

Looking at your situation as a whole can help you decide whether you should file. It can also help you decide whether now is the time to file or whether you should wait.

If you do not currently have a source of income and do not foresee getting regular income again soon, it might be a better idea to hold off on filing. Once you have filed for bankruptcy and had debts discharged, that does not protect you against repayment of new debts. If you will not have the ability to pay off any new debts soon, it could be better to wait.

Additionally, it is good to keep in mind that you will not be able to file again for eight years after your bankruptcy is discharged. If you encounter a significant setback such as an expensive health problem between now and then, bankruptcy will not be an option again during that period.

When It Can Be Better to File

If you were already falling behind on monthly bills before losing income and don’t see that changing when things get better, bankruptcy can provide a clean slate and a fresh start.

While filing for Chapter 7 bankruptcy does require giving up some luxuries, it also means removing the weight of unmanageable monthly bills on debt that just continues to accrue.

The choice to file for bankruptcy is not one to take lightly. It is not a choice you should enter into because of fear. Instead, think strategically, make the right decision at the right time, and choose what will give you the best results in the long term. 

Work with a Bankruptcy Attorney

It is legal to file for bankruptcy yourself. However, bankruptcy laws can be difficult to understand. There is a massive amount of documentation needed in order to properly demonstrate your claim. Working with a Chapter 13 or Chapter 7 bankruptcy attorney costs money out of pocket, but provides the peace of mind that your claim has been filed properly. Bankruptcy attorneys have strong familiarity with the applicable laws and restrictions, so they can be sure that you are well protected.

We’ve been helping Atlanta families understand their financial options and free themselves from unsustainable debt since 1983. If you are considering bankruptcy, get in touch today for a free consultation. We’ll discuss your options and help you move forward on the best path for you and your family.