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Things You Should Know About Filing for Bankruptcy During Coronavirus

Many people have lost their jobs because of the COVID-19 pandemic. They have been required to stay at home, which means that many businesses have been forced to close their doors for months on end. This means employees are being laid off.

Without work, many people can no longer afford to pay important bills, such as rent. Even buying essentials, like groceries, becomes difficult. If you think bankruptcy might be in your future, the lawyers at Scura do not want you to jump into it right away. There are some things you should know about it first and you might have other options.

Look at Your Options

If you feel that your debt is not in control, you have three options. First, you could pay the bare minimum. You could also come up with a settlement with your lenders. Or you could file for bankruptcy.

It is better to try the first two options before filing for bankruptcy. Instead, you will want to work with your bank, so you can get help immediately. That way, you may be able to put off or lower your payments. You might be able to get back to normal without having to file for bankruptcy.

Start Calling Your Lenders

Regulators, lawmakers, and banks are all coming up with assistance programs. You should use them while you still can. For example, Congress has blocked lenders from beginning foreclosure procedures on federally backed mortgage loans. You also can ask for forbearance on your mortgage for as much as 180 days.

Many banks have hardship programs so you can defer debt from sources like credit cards, student loans, and cars. Then, you can keep paying your debts off once you’re in a better financial position.

Make sure you tell your lender what is going on before you begin to get late fees. Being proactive is the best approach. You may not get the benefits listed above if you never ask for them. Make sure that you take note of all of the details, including the name of the person you talk to.

Additional Steps

The relief programs will not last forever. You will still have to pay off the loans at the end. Always look at the terms carefully. In some cases, you may have to pay off everything at once. However, if that is not enough time for you, then you may want to ask for additional relief. That may involve lowering your interest rates or making the monthly payments lower.

Loan Modification

A modification to your loan involves reworking your mortgage’s terms. Once it gets approved, you will have lower monthly payments, making it more affordable. To do this, you will need to file some paperwork with the loan provider. It is best to work with a specialist because the process can be difficult.

Credit Card Debts

The right thing to do if you owe money on your credit cards is to get a debt settlement or management plan. With this process, a debt counselor will help you consolidate the remaining debt. That way, it will only be one monthly payment instead of several. In some cases, you can get a lower interest rate, so you can pay off the balance more easily.

However, if you might not be able to pay off everything completely, consider getting a settlement. If you can make a large payment to cover part of the balance, the company might agree to erase the total balance. For example, if you owe $5,000, you may be able to pay just $2,000.

However, either of these steps will negatively impact your financial credit score. If you miss a payment, your score will go down. The higher that your credit was before you skipped a payment, the larger of an impact you will notice.

About Bankruptcy

You have two options for bankruptcy. With Chapter 7, you will sell off your valuables, whether that is a second home, vehicle, or jewelry. Usually, you can expect all your debt to be wiped out once the judge has approved it in court. It will take around three to five months.

With Chapter 13 bankruptcy, you will pay off your debt in installments. That is good if you are facing eviction. This also is a good option if you do not want to sell your belongings. It involves working hard to pay off all your debt, and after a few years, the rest of your debt is erased.

You should think about whether choosing bankruptcy now will benefit you. For example, if your car will soon be repossessed, then it may be good to go with Chapter 13 to stop it. If you have a federally backed mortgage, then you may be safe for now.

Think about whether you can get away with not filing for bankruptcy. If you file now, you will have to wait many years before you can do so again. If you have more debt before that time, you may be stuck.

Bankruptcy is not an admission of failure. Although many people do not want to take this step, it can relieve your financial situation when you do it right. Think of it as a fresh start instead of something to be ashamed of.

That’s especially true if you lost your job unexpectedly or even if you have recently been furloughed. Once your bankruptcy case is approved, you will be free of debt. Use this time as a wake-up call to remedy your spending habits.

Closing Thoughts

Having debt may feel embarrassing, especially if you can’t pay it off any longer. But taking the right steps is nothing to be ashamed about. Whether that means getting assistance or going through bankruptcy, you will be improving your situation. It is not the end of the world.

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