We have heard from clients who are experiencing financial difficulties because of the economic impact of COVID-19 quarantines and business closings. Hardworking people are suddenly finding themselves without a job and without the ability to pay their mortgages, car notes, and other obligations. The loss of income has hit many people hard, and some clients have asked us if they should consider filing for bankruptcy.
Before you make a decision, consider these questions.
- Do you have a pending lawsuit or current garnishment?
- Are you falling behind on your mortgage?
- Are you behind on your car payments, or is your car in danger of repossession?
- Are you overwhelmed by credit cards or medical bills? Are you having trouble keeping up?
If you answer yes to any or all of these questions, then you may want to speak with an attorney.
A closer look at bankruptcy
As scary as it might seem, the bankruptcy process is meant to get you back onto solid financial footing. There will be some pain, but you can escape from crushing debt.
There are several factors that go into determining how and whether you should file bankruptcy. For consumers, there are two options: Chapter 7 and Chapter 13
The Chapter 7 process is the long-term elimination of any debt a consumer has accumulated before the filing. This creates an “automatic stay” over you, the debtor, and your assets. This means that a creditor cannot collect on any debts or lawsuits against you or your assets for the duration of the bankruptcy. At the end of the bankruptcy, your debts are discharged, and creditors have no legal right to collect. You may be able to keep a car you are paying on or your current home with a mortgage, as long as certain qualifications are met. The Chapter 7 process takes about five months and is useful for getting rid of credit card or medical debts, as well as stopping any garnishments you may face. You can file for Chapter 7 only once every eight years.
Similarly, the Chapter 13 process discharges your debt over a period of 3 to 5 years. In a Chapter 13, you will participate in a Chapter 13 Plan, which is a set of rules for how your estate will be administered over the 3 to 5 year period. The Plan usually includes set payments for attorneys’ fees, car payments, mortgage payments, and debts to unsecured creditors. Chapter 13 is helpful if you have fallen behind on debts such as your car note or home mortgage. The Plan is administered by a Chapter 13 Trustee, whose responsibilities include paying secured creditors and making sure the Plan is completed within five years. Chapter 13 bankruptcy stops car repossession, foreclosure, and any other sort of lien collection.
At Barrett & Farahany, we understand that the prospect of filing for bankruptcy is both stressful and concerning for employees, and we are here to help in any way we can. If you have questions or believe that you should file for either Chapter 7 or Chapter 13 bankruptcy, please reach out to us at 404-487-0922 so that one of our attorneys can talk through your situation with you and advise you about what can be the best option for you.