COVID-19 has brought the entire world to a complete halt. Businesses have shuttered their doors in an effort to prevent the further spread of the deadly virus which has killed hundreds of thousands of people. As a result, many have lost their source of livelihood.
Filing for Bankruptcy as a Last Resort
Sometimes, filing for bankruptcy is the only option to get out of your current financial woes. If this is something that you have been mulling about, you should consult a bankruptcy attorney. They will be able to find a solution that you might have not considered before or guide you as you navigate the legal process and get you everything that you can to be able to restart your life with a clean slate.
Filing for bankruptcy can help you wipe out any standing credit card balances, medical bills, and overdue rent that you will not be able to pay. It, however, will not be able to save you from student loans or newly-acquired tax debts. If you go for Chapter 13 bankruptcy, however, you will be able to get an extension on deadlines.
Chapter 7 Versus Chapter 13
Most bankruptcies are filed under either Chapter 7 or Chapter 13. The two are similar, but the major deciding factor would be your income level. You have to be earning below a certain threshold to quality to Chapter 7. If you go past that line, you will have to file for Chapter 13.
With Chapter 7, you likely will have to return the car or house to the creditor. You can only keep these properties if you can arrange to pay their entire costs upfront. Whereas, with Chapter 13, you will be able to keep the house or a car if you agree to maintain a court-ordered payment system.
The properties you use to live and work will not be taken away from you if you file for a Chapter 7 bankruptcy.
Qualifying for Chapter 7 or Chapter 13 Bankruptcy
Your earnings must be equal or below the median income in your state to qualify for a Chapter 7 bankruptcy. However, there are two exceptions.
You have to take the means test to see which chapter is applicable to you. If your gross income is higher than required, you might be able to use the second part of the means test which allows you to deduct some of your expenses. If the majority of your debt was due to your business dealings, you will be exempted from taking the means test altogether.
Most people who have been recently laid off might not have the capacity to apply for Chapter 13. This chapter is for those who can pay a portion of their debt and, therefore, is not ideal for those who lost their source of income.
You may want to file for a Chapter 13 bankruptcy once you return to work. What it can do anyway is to allow you a bit of time to catch up on dues of your bills.
If you do not know how to proceed, talk to an attorney who specializes in bankruptcy. They will be able to assess your situation and tell you whether you qualify for Chapter 7 and Chapter 13. They will also help you file for bankruptcy during this time when everyone is quarantined at home. Most offer a free first consultation anyway. Take advantage of it and ask for an expert’s advice.