Bankruptcy Options During A Time Of Crisis – Don’t Wait Until It’s Too Late

If you’re financial situation is growing increasingly worse during this time of crisis it may be a good idea for you to explore your bankruptcy options now.

Don’t wait until it’s too late!

On July 30, the Commerce Department reported that COVID-19 has triggered the worst economic crisis in modern American history.

The gross domestic product (GDP) is used to measure economic activity. It was revealed that it shrank at a rate of 32.9 percent due to retailers, restaurants, bars, gyms, and other businesses closing their doors because of the crisis, putting millions of people out of work.

To put this in perspective the GDP and economic shock are four times worse than the Great Depression.

The economic uncertainty has reached a dire threshold that will take years of recovery for many.

Nariman Behravesh, the chief economist at IHS Markit said, “Horrific. We’ve never seen anything quite like it.”

Currently, 1.43 million people have filed for unemployment in the last week of July. The number continues to increase as more families face financial devastation.

As America enters an economic catastrophe, many are scrambling to make ends meet and are now faced with the decision of whether or not to file for bankruptcy.

Benefits of Filing For Bankruptcy

Bankruptcy sounds like the end of the world to many, but it might prove beneficial because it helps stop the lawsuits and collection calls. Plus, at a time when all your pennies count, you can halt wage garnishments and stop foreclosure proceedings. Your debt is erased, and you might be able to start fixing your credit score so you can begin to rebuild your financial stability.

Eliminating Your Debt with Bankruptcy

If you listen to credit bureaus and scoring experts, they will tell you that bankruptcy is bad and will destroy your credit scores. Charge offs, collections, foreclosures, and repossession all take a backseat to bankruptcy when it comes to driving down your score.

Of course, there is some truth to these statements but with the global pandemic raging for months, many people have been struggling to cope with their rising debt for a long time, so their credit has already experienced painful damage.

Once you file for bankruptcy, your debt will be erased and can start to repair your finiancial situation slowly.

Jaromir Nosal, an assistant professor of economics at the Boston College and who co-wrote the Federal Reserve Bank of New York states, “Within a year, you’re better off. It’s a pretty rapid recovery.”

Repairing Your Credit with Bankruptcy

Researchers have found that your credit score will start to recover about 18 months after filing for bankruptcy.

If you file a Chapter 7 bankruptcy then your credit score will plunge to below 600 but by the time the bankruptcy undergoes discharge and about six months have passed, most people have again achieved a credit score of 620 or better.

Chapter 13 bankruptcy places you on a three to five-year repayment plan.

Usually, they will undergo discharge and your score will hover at 535 to 610. From 2007 to 2013 more than half of all Chapter 13 bankruptcies were discharged. Those who did not receive a discount did experience a score boost.

Typically, after two years, those who filed bankruptcy have managed to attain a credit score of 620 and about one percent has a score of 700 or greater after four years.

Filing Bankruptcy During COVID-19


With so many states practicing social distancing to control the spread of COVID-19, federal bankruptcy courts have had to change the way they operate to help keep the public safe.

Certain courts have closed in various states and additional closures might occur as the virus flairs up in other regions.

However, if you have filed for bankruptcy and the court ends up closed due to the coronavirus, then you will still have protection from creditors via an automatic stay.

If you have not filed for bankruptcy but the court in your region has closed, then you might be able to ask your attorney to file your case in a different court.

The  Coronavirus Aid, Relief, and Economic Security (CARES) Act has also had an impact on some bankruptcy rules.

The changes are temporary, but you should check with bankruptcy attorney Gregory Oberhauser to learn about the modifications.

Certain things such as if you are a debtor who currently has a repayment plan under Chapter 13 then you can extend the plan for up to seven years. However, such modifications do require a notice along with a hearing and evidence of hardship caused by COVID-19 will need to be presented.

In addition, stimulus checks issued because of COVID-19 are not considered income if you are filing a Chapter 7 bankruptcy.

Also, if you are filing a Chapter 13 bankruptcy, they are not considered disposable income.

Stimulus checks will not impact your eligibility for either Chapter 7 or Chapter 13 bankruptcies.

The debit limit bestowed businesses filing under Subchapter V of Chapter 11 has been increased.

The landscape of bankruptcy as changed due to the COVID-19 pandemic and it is imperative that you seek legal counsel to navigate the changes.

Contact Oberhauser Law to schedule a consultation with Attorney Oberhauser who has the experience and expertise to navigate you through the process.


Attorney Gregory Oberhauser

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Gregory Oberhauser is the ONLY attorney in Massachusetts to be distinguished as an ACS-CHAL Forensic Lawyer-Scientist by the American Chemical Society!

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