Coronavirus / COVID-19 and Bankruptcy - Dennis B. Dahlberg

As our country continues to respond to the challenges of the COVID-19 pandemic, it is important that people take the time to actively manage the effects of the pandemic on both their personal and business finances.   Americans should consider to take steps now, to mitigate loss, maximize cash and weather these challenges to the best of their ability.

Many lenders and creditors are offering deferment of payments, forbearance, waived fees, extended terms and more to those customers who are facing extreme challenges due to COVID-19.  By communicating openly, you are more likely to garner benefit from these programs and maintain great relationships.  Most companies will be willing to work with you, especially if you communicate proactively, including those involving student loans.

The IRS and many States (Ohio included) have extended both the filing and payment deadline for the 2019 income tax season to July 15, 2020.  If you had set aside funds for tax payments and now need these funds to cover crucial expenses, you have a little extra time to make the income tax payments or set up an installment agreement.

The $2.2 trillion coronavirus relief package, enacted and signed on Friday, March 27, 2020, will see payments, either by direct deposit or actual check, go to millions of Americans.  The one-time payments include $1,200 per adult, $2,400 per couple, and $500 per child.   Individuals making $75,000 or less qualify to receive a check, or $150,000 per couple.  These payments may provide some temporary relief for many Americans.

If you feel as though you have exhausted other avenues, you may want to consider filing for bankruptcy.  Bankruptcy is a legal process and we have seen times when this is the right move.  If you feel that this might be your only option, be sure to conference with a one of our reputable bankruptcy attorneys. 

There are many factors one should consider if he or she is considering filing a bankruptcy as either a Chapter 7 bankruptcy or a Chapter 13 bankruptcy.  The purpose of a bankruptcy is that it enables an honest debtor to obtain a fresh start.  The bankruptcy code, then, while allowing a debtor to achieve a fresh start, attempts to balance the creditor’s rights to collect their debts while still assisting the debtor to start his or her financial life on a new path.

In a Chapter 7 bankruptcy, you are basically asking the Court to discharge most of the debts you owe. In a Chapter 13 bankruptcy, you are filing a repayment plan with the Court to pay back all or a portion of your debts over time. The amount you must repay depends on how much you earn, the amount and types of debt you owe, and how much property you own. Generally, under a Chapter 13 bankruptcy, you will not lose your property because you are funding your repayment plan through your income.  Under a Chapter 7 bankruptcy, generally you are selecting the property you are eligible to retain from a list of exemptions, and can typically keep property that you are current with your payments on.

You should also carefully consider your options before withdrawing funds from your protected retirement plan such as an IRA or 401k. Funds deposited into these types or accounts are typically protected under bankruptcy proceedings. It may make make more sense to keep these funds deposited and protected and file for bankruptcy earlier rather than exhausting your retirement and then having to file for bankruptcy anyway.

To decide which bankruptcy is right for you, it is important to consult a bankruptcy attorney before proceeding.  To get the facts and find out if bankruptcy could work for you, please contact our office for a free consultation with one of our bankruptcy attorneys.

Please feel free to contact one of our attorneys for a free consultation at 614-670-8103, or visit us at www.DSFlawfirm.com.

- Dennis B. Dahlberg, Esq.