Bankruptcy During the Pandemic: Factors to Consider
Bankruptcy During the Pandemic: Factors to Consider
Our economy is at a standstill. Many have been laid off or have had work hours reduced due to the coronavirus and social distancing mandates. Here’s a guide to some federal debt relief as well as some things to keep in mind should you be forced to consider bankruptcy during the Covid-19 pandemic.
Temporary Federal Debt Relief During the Pandemic
Student Loan Forbearance: Federal student loan borrowers did not have to make monthly payments until September 30, 2020, under the CARES Act. During this 6-month period, interest did not accrue, and the six months applied to loan forgiveness programs.
SBA Loans and Grants
For sole proprietors, the self-employed, independent contractors, and small businesses with 500 employees or fewer, the CARES Act created the EEIDL available direct from the SBA website. Applicants could receive a grant of up to $10,000 even if the SBA ultimately denied their EEIDL application.
Homeowners and Renters Relief
The CARES Act requires federal lenders Freddie Mac and Fannie Mae to offer mortgage forbearance for up to a year to borrowers experiencing financial hardship due to the pandemic. Borrowers must apply for forbearance as it will not be extended automatically.
Considering Bankruptcy During the Pandemic
Hopefully, the relief programs that began with the CARES Act have helped most keep afloat over the last 6 months. However, for those still out of work and having trouble paying their bills, you may need to consider other options. One of those options you may be considering is filing for bankruptcy.
Advantages and Disadvantages of Bankruptcy
The advantage to filing for bankruptcy is that it will help relieve you of your legal obligation to repay some or all of your debts However the main disadvantage of bankruptcy is that it will lower your credit score and remain on your credit report for 7-10 years depending on the Chapter filed.
Things to Consider Before Filing Bankruptcy During the Pandemic
Filing bankruptcy might be the answer for those who have lost income due to the coronavirus health emergency, however, those considering bankruptcy should consider the consequences and benefits of filing now versus filing later.
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