If you've been hit hard financially by the COVID-19 (also known as coronavirus) pandemic, you are not alone. Millions of Americans have faced unemployment, and many businesses have received government funds to help them try to weather economic devastation. There is no shame in facing financial hardships and feeling as though you're out of options, especially during a pandemic.
Bankruptcy can be a hard pill to swallow emotionally, and it carries practical consequences, such as required waiting periods for future mortgages. Still, depending on your situation, whether you are considering filing for bankruptcy individually or for your business, learning about your options could give you some peace of mind.
Types of Bankruptcy
Chapter 7 bankruptcy is an approach in which individuals liquidate assets to pay off debts. It works best for people who have unsecured debt they've taken on without pledging collateral, such as credit cards or medical debt. If you have assets you can liquidate or if you don’t have any assets, Chapter 7 bankruptcies can resolve your debt relatively quickly and give you a chance to start fresh.
Chapter 13 bankruptcy is designed for individuals who have a home or other secured property at risk of foreclosure or repossession. In Chapter 13 bankruptcy claims, individuals develop a 3-to-5-year payment plan that allows for more manageable monthly payments. You must have regular income to cover the new monthly payment amount.
If you own a business and you're struggling to make the financial equation work, Chapter 11 bankruptcy might be a lifeline. Filing for Chapter 11 enables you to restructure your debts so you can make affordable payments. Your business must be viable, and you will need a plan to make it sustainable under new terms.
Moving Forward Financially
Filing for bankruptcy can be a saving grace for people and businesses facing financial hardship, but it is not a step to take lightly.
"Some people may feel a 'moral aversion' to bankruptcy, as if they are cheating society or being dishonest. However, we have bankruptcy protection for very good reasons," said Shawn A. Cole, John G. McLean Professor of Business Administration at Harvard Business School. "Individual bankruptcy law, in particular, is designed to help people when they are at a vulnerable time and encourage risk-taking, such as entrepreneurship, vital to economic growth. In practice, firms, lenders, and even our current president routinely file for bankruptcy. So, I would encourage individuals to rationally examine the benefits and costs of bankruptcy protection, rather than following emotion."
Over time, consumers can rebuild their credit and access credit cards, auto loans, and mortgages. Though many consumers facing financial distress may feel as though their situation is bleak, bankruptcy creates a path for consumers to start over financially.
We offer free consultations over the phone and in person. We are ready to discuss your options with you without any obligation to hire us or file bankruptcy. It could be the consultation that changes your situation for the better.
Contact Pearson Butler online or call (800) 265-2314 today to learn about the path to financial recovery.