Bankruptcy Due to COVID-19
Bankruptcy Due to Covid-19
Hundreds of thousands of Americans have lost their lives to the COVID-19 virus. Even more have suffered significant financial consequences; they have lost their jobs or businesses and many others have seen their income significantly reduced. If you’re reading this, there’s a good chance you are suffering financially due to the COVID-19 pandemic.
As another round of stimulus benefits become avialable, you may be wondering if those benefits will be enough to get you through this difficult time. The efforts to contain the virus have pushed hundreds of thousands of people out of work or have forced them into working for a reduced income. There are some strategies for working with your creditors if you find that the stimulus bill is not quite enough to get you through.
Working With Creditors During the Pandemic
First, if you’ve lost your job due to COVID-19 or are working with reduced hours, file for unemployment. Congress has extended some of the additional unemployment benefits. You may qualify, even if you have just had a reduction in hours you may be eligible for partial benefits.
If you are struggling to make ends meet, you should reach out to your creditors and keep them up to date frequently. Silence is not your best option now. Many creditors such as mortgage servicers, auto lenders, and credit card companies are offering assistance to individuals financially affected by the pandemic.
Depending on how long your employment is affected, you may come to a point where there simply isn’t enough money to go around. The decisions regarding which creditors get paid and which do not can have long term consequences and will require a strategy.
Strategies to Manage Income Loss from COVID-19
If you are renting, paying your landlord should be among your highest priorities. Unlike mortgage lenders, most landlords are simply not in a financial position to weather the loss of rental income due to the high expenses associated with the rental property itself. You are likely to be evicted fairly quickly if you stop paying your rent; although there is a moratorium on evictions for now. There may be some assistance available to help with overdue rent and utilities, but there are eligibility requirements that must be met. That said, a frank conversation with your landlord might buy you some time.
Car payments should be another high priority. You’ll have more flexibility with a nationwide lender than you will with a buy-here-pay-here lender, but their sympathy is limited. They will feel obligated to protect their interest in the collateral and can move quickly to repossess after only a few missed payments.
There are more tools for dealing with your mortgage than any other type of loan. While the servicer is not inclined to allow you to skip multiple payments without taking action, they do have formalized loan modification systems in place leftover from the last financial crisis. In a loan mod, your servicer can change the terms of your loan to your advantage. They will commonly reduce your interest rate which will result in a lower monthly payment, or wrap missed payments back into the loan which will bring you current. You can work directly with the mortgage lender on a loan modification.
Credit cards and other unsecured loans are almost always the most aggressive when it comes to collecting debts, they should generally be your lowest priority. However, if neglected long enough they will sue you and attempt to garnish your wages and take money from your bank account, but if you’re not working and don’t have any money in the bank account these are empty threats. If you own a home the consequences of a judgment against you are more significant as judgment creditors can place liens against your home.
Debt Relief for Kansas Residents
The most recent stimulus bill may provide some debt relief, it may not be enough for all Kansas residents, particularly if you were already struggling with debt before the pandemic. High medical bills, credit card debt, and ever-increasing back rent may feel like too much to handle when you already have a lot on your plate.
Despite your best efforts, you may dig yourself into a financial hole during this unsettled period. Fortunately, there are a number of tools available to help you get back on your feet once you do get back to work. It’s never easy to make this call, but it may be time to consider filing personal bankruptcy to avoid further financial ruin from overwhelming debt. While filing for bankruptcy may not sound like a good option, it’s actually a good choice for those needing significant debt relief. Finding a reputable bankruptcy lawyer is the best thing you can do to start getting out of debt. Contact Skinner Law today for more information.
Meet Nancy Skinner
Nancy Skinner graduated from the University of Kansas School of Law in 2009. She also earned a Masters in Business Administration from the University of Kansas School of Business in 2009. Nancy’s main priority is to assist clients through the bankruptcy process and on to a fresh start. Nancy is admitted to practice in Kansas and Missouri. Learn more.
Nancy's Educational Background Includes:
- Juris Doctor: University of Kansas
- M.B.A.: University of Kansas
- Bachelor of Arts Psychology: California State University at Northridge