The Covid-19 outbreak has caused people to fear and worry for their health and the health of their loved ones. On top of that, it triggered the worst global recession the world has ever seen, leaving millions of Americans out of jobs and applying for unemployment. For most, this means financial instability – little or no personal cash inflow, getting behind on bills, and accumulating debts. When faced with this kind of crisis, you may be tempted to jump right into bankruptcy, but financial experts say that it’s very important to consider all your options first before filing for bankruptcy. If you are in Maryland and experiencing a financial bind due to the pandemic, you can consult with a local Bankruptcy Lawyer in Baltimore to learn what options are available to you.
Consider Your Options
- Take full advantage of programs that will help you save money
State, federal, and local governments along with banks and other creditors have arranged for assistance programs advocated as a safety net during the Covid-19 pandemic. For example, the Coronavirus Aid, Relief, and Economic Security (CARES) Act, signed by the President on March 27, 2020, provides foreclosure moratorium to homeowners with federally backed mortgage loans. It also gives homeowners the right to request for mortgage forbearance for up to 180 days.
Meanwhile, borrowers who are not able to make regular payments on their account can request for a hardship program from their lenders. Many lenders, including mortgage companies and credit card companies, have arranged programs that offer to defer debt payments until borrowers can get back on their feet. Keep in mind that most lenders provide relief on a case-by-case basis, so it’s best to call your lender to ask what assistance they can give.
- Make arrangements with your lenders
If you are still struggling after the forbearances and deferment programs, you may want to request for other long-term relief plans from your lender such as reducing the interest rate on your loans, or credit card. You can also contact your mortgage company and request for a loan modification. When your mortgage is modified, you can have a lower monthly payment that you can afford. You have the option to self-submit the modification application or hire a bankruptcy attorney in Baltimore who is an expert in this matter to help compile and process it for you.
- Devise a financial strategy
After talking to your creditors, you’ll be in a better position to decide which bills you should defer. This strategy ensures that you won’t waste money paying a debt that can be discharged in your bankruptcy case if filing for bankruptcy can’t be avoided.
File for Bankruptcy as a Last Resort
Due to the significant impact of the Covid-19 crisis, debts may spiral out of control and filing for bankruptcy may become inevitable. For unemployed individuals, there are generally 2 types of bankruptcy they can file: Chapter 7 and Chapter 13.
Chapter 7 Bankruptcy After Unemployment
Chapter 7 is best suited for low-income or unemployed debtors who can’t pay all or a sizable portion of their debts. Under this chapter, non-exempt assets are liquidated in order to pay-off creditors. Outstanding debts are then discharged once a judge approves the filing. The whole process takes about 3-4 months to be completed. There are some debt categories, however, that can’t be erased by bankruptcy such as domestic support obligations, student loans, and tax debt to name a few.
In order to qualify for Chapter 7 after a layoff, you need to pass the means test. This test checks if your income is below your state’s median income. If your income is too high, you can use the second option of the test to subtract allowable expenses. The means test considers your income over the last 6 months, so if you just got laid-off of a high-paying job, you may have to wait a few months before you get qualified.
Chapter 13 Bankruptcy After Unemployment
Chapter 13 bankruptcy is intended for those with a regular income who can repay all or part of their debts in installment for a specific duration. If you become unemployed but you have other sources of income like rental income, you can still file for Chapter 13. Under this type of bankruptcy, debtors can retain all their assets if they complete their repayment plan.
Consult with a Bankruptcy Lawyer
If you are facing a serious shortfall and considering bankruptcy, it’s best to speak to a bankruptcy lawyer at the earliest opportunity. A bankruptcy lawyer can gauge your situation and help you decide which type of bankruptcy is apropos of your case and what course of action you should take.Richard J. Hackerman, a bankruptcy lawyer in Baltimore, MD, is a subject matter expert in bankruptcies, debt settlements, and tax relief. For a free consultation, call us at 410-243-8800 or 888-243-5500.