Bankruptcy in 2020: 3 considerations
The coronavirus pandemic has put businesses and individuals in a difficult struggle to make ends meet. Government notices throughout the country have forced non-essential businesses to shut down and have left others to struggle through daily operations while attempting to minimize face-to-face interactions. This new reality has left many without a regular paycheck making it difficult to pay rent, buy groceries and meet other financial obligations.
This can leave businesses and individual considering relief through bankruptcy. In either case, those who are considering filing for bankruptcy in 2020 are wise to take the following into consideration.
Step #1: Learn from previous recessions
Those navigating these financial difficulties can learn from previous recessions. The financial crisis of 2008 may have paved the way for a surge in bankruptcy petitions in 2020. In an attempt to help reduce the full impact of economic fallout, the Federal Reserve has deployed policy tools like emergency lending and loans as well as stimulus checks. Although these tools may cushion the fall, many individuals and businesses may still find themselves struggling with insurmountable debt.
These individuals and businesses can learn from the recent past. The Great Recession of 2008 provided multiple examples of bankruptcies. During 2010 of the Great Recession, an estimated 1.6 million people and businesses sought relief through bankruptcy. In one example of successful use of this legal tool, a mall operator was able to get through its financial difficulties by restructuring its debt load with a Chapter 11 bankruptcy petition. In other cases, a Chapter 7 can help applicants eliminate qualifying debt.
Step #2: Watch for changes to the law
The coronavirus pandemic has already led to multiple changes in the law. The Coronavirus Aid, Relief and Economic Security Act (CARES), for example, directly changed the bankruptcy code. It states “recovery rebates” should not count as income during the means test for a Chapter 7 bankruptcy petition or as “disposable income” in Chapter 13 cases.
Changes like this may continue. Bankruptcy law will evolve. At this time, the provisions noted above are set to expire March 27, 2020. However, lawmakers could pass an extension or additional measures in the future.
Step #3: Determine the best course of action for your situation
Every situation is unique. There is no “one-option-fits-all” approach. As a result, it is a good idea to seek legal counsel experienced in this niche area of the law to help guide you through your decision-making process. An attorney experienced in bankruptcy petitions can review your specific situation and provide guidance tailored to your needs. This can include a discussion of what bankruptcy would like in your situation as well as alternative options.