When the virus steals your income, it’s easy to be overwhelmed with unpaid bills and terrifying economic uncertainty.
Immediate relief by filing bankruptcy may look appealing.
Make it all go away, you say. I’ll never pay this off.
But not so fast.
With few exceptions, this bankruptcy attorney thinks it’s too early in this pandemic to think about filing bankruptcy.
Here’s why.
Creditors have few remedies
In the short run, unpaid creditors can’t do much about non-payment. Courts are essentially closed, lawyers are at home, and sheriffs have been ordered to stand down.
The normal legal remedies for non-payment simply aren’t available.
And few creditors think that hard ball tactics and lawsuits are actually going to make money magically appear.
We’re not at the bottom
One of my indicators that it’s time to file bankruptcy is when you know you’ve hit the bottom.
When things are looking up and your future income is exposed to past debts, then it’s time.
Relief in bankruptcy is a rationed item: you can only file Chapter 7 every eight years, and Chapter 13 slightly sooner, but not at will.
You don’t want to shoot your wad too soon. Move too quickly and you may find that more debts accumulate but you’ve already played the bankruptcy card.
Today’s debts dischargeable tomorrow
You needn’t worry that you have to file bankruptcy before you are sued, or before a judgment is entered, or even before your bank account is levied.
At any point in the life of a debt, the debt can be discharged. Assuming it’s a dischargeable debt, which most are, its age or procedural posture makes no difference.
Governmental action may change the picture
Given the massive nature of the COVID-19 recession, further action from the government to stabilize the economy and protect the millions of people affected is assured.
The shape of that assistance, the size of the help, and whether it actually keeps people from needing bankruptcy, it’s too soon to know.
But this bankruptcy veteran is counseling that we take it slow and understand the lay of the land before rushing to bankruptcy court.
