Consumer bankruptcy filings have been down during the COVID-19 crisis. The second quarter even showed a 25% drop! That’s good, right? Well, about that…
The combination of the CARES Act and court closures temporarily lowered personal bankruptcy filings during the last few months. Government aids like stimulus checks, unemployment benefits, and better deals on loans undoubtedly helped some individuals stay afloat during the lockdowns. Unfortunately, with many CARES legislation benefits ending, economic difficulties are only expected to rise. Add in court re-openings and consumer bankruptcy filings are on track to explode.
July already saw a jump in COVID-19-related bankruptcy filings. In Arizona, 5,626 bankruptcy filings have been tied to the pandemic’s economic hardships, 1,086 of them in July alone. That puts our state at 17th in the country in personal bankruptcy. Consumer bankruptcy rates often belatedly indicate economic difficulties because they’re a last resort. Right now, you might wonder if that’s your financial future.
Bankruptcy may be the best option to clear your debts while also protecting your assets. The two most common options for consumer bankruptcy are Chapter 7 and Chapter 13. Determining which is right for you depends your specific situation.
Chapter 7 is known as a liquidation bankruptcy or the “fresh start” bankruptcy. This form of bankruptcy is used for debt like credit cards and bills — unsecured debt with no collateral. Chapter 7 can discharge your debt quickly, but not everyone qualifies. There are certain requirements and thresholds one must meet in order to qualify for Chapter 7 relief.
Chapter 13, by contrast, takes longer but you can keep unprotected assets and/or catch up on your past due vehicle or mortgage payments. For example, if you own a home and face foreclosure, filing for Chapter 13 can save your house. This bankruptcy form provides relief for secured debts, like real estate or vehicles. Often taking three to five years, Chapter 13 is a reorganization form of bankruptcy, setting up a payment plan to pay down your debt over time.
Through all of this, you won’t be alone. Millions of Americans are facing sudden unemployment through no fault of their own, making their financial obligations harder to meet. Unexpected life changes like this are often the reason for bankruptcy.
Rather than letting fear or shame rule you, reach out to one of our knowledgeable and compassionate lawyers. You’re not alone because Perez Law Group, PLLC is by your side. Call us today for more info at (602) 730-7100 or 1-(888) 59-PEREZ.