How Student Loan Debt Affects Your Credit
How Student Loan Debt Affects Your Credit
February 14, 2020
COVID-19 Bankruptcies

COVID-19 Could Cause Record Bankruptcies

According to CBSNews, the week ending 4/10, around 5 million people filed new claims for unemployment benefits, bringing the total to 22 million people finding themselves out of work during the COVID-19 pandemic. These are astonishing numbers, easily decimating all unemployment records. To put it in some context, during the Great Depression, 15 million people were jobless.

A World of Uncertainty

The U.S. economy shutting down like it has is an unprecedented event. Economists are uncertain as to what will happen when things begin to open up again. Even after new COVID-19 numbers hit their peak and begin to even out, it could take months to get people back to work. And businesses will likely have to take back employees only as needed until business increases and they can add more.

Another big unknown is the average consumer. When the virus slows and the country starts moving again, will consumers be as eager to start spending? Will they want to come out of their sanitary homes and face a world of germs again? Certainly, an event such as this one is going to have an impact on our habits moving forward but how big will that impact be?

For anyone struggling to make ends meet before the coronavirus hit our shores unexpectedly. The last couple of months have been a waking financial nightmare and until the virus is diminished and the economy gets back up on its feet, the nightmare continues.

Bankruptcies On The Rise

While many creditors have offered ways to help consumers during this crisis, for many it simply won’t be enough. A recent article by Bloomberg Law cites research by economists at 3 Federal Reserve banks. They predict bankruptcies could rise to nearly a million unless the government stimulus package is effective. It’s not just joblessness that could cause people to seek relief from bankruptcy. There is also the potential for many people to be left with high medical bills in the wake of the coronavirus.

Changes to Bankruptcies

As part of the stimulus package, temporary changes were made to bankruptcy law. There is help for consumers who may need to file for bankruptcy or for those who had already filed before COVID-19 surfaced.

Some of those changes include:
Means Test: When you file for Chapter 7 Bankruptcy, you must pass a means test to determine if you have the ability to pay your creditors. If you received money as part of the government’s COVID-19 stimulus package, it will not be considered income on the means test. It is also not considered disposable income for those filing for Chapter 13.

Repayment: For people who have filed for Chapter 13 Bankruptcy and are currently in repayment, you may be able to modify them and make changes due to new hardship. Such as extend your payment terms up to an additional 2 years, delay your payments, or even apply for a hardship discharge.

More of the temporary changes to the bankruptcy law can be found here.

Lingering Questions
There is one thing that’s for sure: COVID-19 has left all of us with a lot of questions. For the lucky ones, it’s “My cat is driving me crazy, when can I work in my office again?” Unfortunately, for many others the questions are “When will I earn a paycheck again?” and “How will I pay my bills?”

If you find yourself asking these questions, Call Miller, Hollander, & Jeda at (239)775-2000 for a free consultation and get the relief you need today.