Bankruptcy During Coronavirus
The coronavirus epidemic has caused bankruptcies across the nation to skyrocket. Millions of Americans have been left marooned without a job in the wake of this devastating pandemic. A lot of people don’t fear the virus quite as much as they fear the economic fallout that could result because of it. No one questions the potential for dangers that could happen because of it as we have also had to navigate the possibility of a food shortage from so many people being off work in crucial industries.
What to Do as a Business
Perhaps you have begun to consider filing for Chapter 11 or Chapter 13 Bankruptcy. You have a few things that you should first know to help you avoid this. During this time of crisis, you have a couple of different options that you might be able to fall back on. Some of the options that you have available to you include:
- Pay the minimum on your bills for as long as possible.
- Negotiate a settlement with your lenders.
- Seek a crisis loan from a financial institution.
During the peak of this crisis, many financial institutions and other companies have begun to offer help to businesses at a more affordable price. This will help businesses to recover from what could be a long-haul problem that we have to face. Don’t jump right into filing for bankruptcy until after you have looked at some of these possible solutions to the Covid-19 crisis.
Small Business Assistance
Some of the possible loans that you could take advantage of as a small business include:
- 7(a) Program
- Employee Retention Credit
- Paycheck Protection Programs
- SBA’s Economic Injury Disaster Loan Program
We believe that you should never take bankruptcy lightly, which is why you should first look at all the options that you have available to you to stay afloat. Especially if your business was doing good before the crisis, it wouldn’t be wise to walk away from that now. You have federal programs available, but you can also take advantage of some of the local and state programs as well built to help small businesses get through this crisis.
Work with Your Creditors
In general, it doesn’t make sense for you to file for bankruptcy right off the bat because a lot of lenders will be more willing to work with you during this time. For example, you could ask to have your monthly payments lowered during this time to help with paying for it. Especially if things were going well for your business before this crisis, you may find it more advantageous to try to wait out the storm. Do your best to stay afloat and keep paying your bills. You have lawmakers, regulators and banks that have all come together during this difficult time to help companies get through it. You might as well take advantage of these programs while you have it available to you. When Congress passed the $2 trillion relief package, this blocked lenders from opening the foreclosure proceedings on any loans that have been federally backed. That means that you don’t have to go to foreclosure court just yet in most cases. Most people during this time are understanding that there are issues that exist, and they’re willing to work with you because of those issues.
Ask for Assistance
During the Covid-19 crisis, many companies understand that everyone is having problems. Because of those problems, they’re willing to work a special payment plan, suspend rent and mortgage payments and forgive late fees. However, to get this relief during the coronavirus, you will also have to ask for it. You should first learn about the options that you have available to you during Covid-19 because you may not even have to file for bankruptcy.
Protecting Your Credit
Especially during the time of the coronavirus, you don’t want to have to worry about credit repair after. To get past the need for credit repair, you might first contact your lenders to see if they will work with you. It can get difficult, but we advise that you try to make the minimum on your payments because this show them that you’re doing your best to stay on track with them. In addition, it won’t harm your credit score as much as an actual late payment. If you happen to see any information online that doesn’t check out, you can choose to dispute the information. You have to make this dispute with each bureau. That’s another one of the reasons that we don’t believe people should file for bankruptcy. That remains on your credit score for seven years. We should emphasize that a Chapter 13 remains on your credit report for seven years. Let’s say that you go through the court to file a Chapter 7. With Chapter 7, this stays on your credit report for up to 10 years. That will be extraordinarily damaging to you, and it can keep you from getting loans in the future to succeed as a business owner.
What Happens as the Relief Program Ends?
You should understand how this relief may not be there forever, and once the Covid-19 crisis ends, it is likely that you will have to pay your bills regularly again. Because of that, you should stay prepared. In fact, you should beware of how some companies might even require that you pay all the bills that you had missed up until that point, which could be devastating if you don’t prepare for it. What can you do to prepare? You might ask your lender if they can lower the monthly payment or the interest rate to help you with getting back on your feet. They could do this for mortgages, credit cards and auto loans.
How to Handle Getting behind on Your Debts
Let’s say that you have gotten behind on your mortgage. You might fill out the application for loan modification. This will help to rework the terms of the mortgage so that it will look more favorable than what it might have been from before. Let’s say that you got behind on your credit card during this time. How can you respond to it? During the coronavirus crisis, it may not be wise to pay it all off at once. You can use the money for emergency circumstances instead. As of right now, some credit card companies have even agreed to wipe out overdue balances to help people get through this difficult time. Keep in mind, however, if you already happen to be up to date, most companies won’t work with you during the time of the coronavirus. If you’re facing Chapter 11, however, you could still have resources available that can help you to get through it unscathed. You simply have to look at the difference assistance programs available at the federal, state and local level. You have many different choices available, but you want to apply quickly because some of these programs have been filling up. You could also work a payment plan that may be helpful.
It Costs Money to File for Bankruptcy
Believe it or not, you won’t get off the hook from debts because it still costs anywhere from $300 to $350 to file for bankruptcy. It costs to go broke. However, you might be able to work payments on this that will make it more affordable. Covid-19 has brought many American businesses to their knees, and with no definite end in sight, we have to prepare for the long haul of this crisis. This is the most significant crisis that we have seen since World War II, which should give you an idea about the gravity of the situation. Because of that, many programs have been offered out to help people get back on their feet.
If you have questions about the bankruptcy process during this difficult time, please contact our Long Island bankruptcy and credit repair office: The Law Office of Adam C. Gomerman.