[COLUMN] Pandemic financial hardship: Can bankruptcy help?

Most debt problems don’t go away and solve themselves. They are there when you go to bed at night, and they’re still there when you get up in the morning. They can cause a lot of ulcers, sleepless nights, stress, and even physical sickness.

As a bankruptcy attorney for the last 22 years, I have seen the devastating effects of serious debt problems on people’s personal lives, their businesses, their families, and their marriages. What I have also seen is that a lot of these effects could have been avoided with proper planning.

Since the pandemic began, a lot of people have lost their income. They have been unable to pay their mortgage or rent and without the temporary forbearance allowed by their creditors, they would not have been able to survive. But these were all temporary fixes. Sooner or later, you will need to face your creditors and pay what you owe.

Facing serious debt problems often causes severe anxiety and fear about the future. What will happen to me and my family if I get sued by creditors? Can they garnish my wages or freeze my bank accounts? Will I have enough to buy food, pay my rent or mortgage, and keep my head above water?

The worst thing that you can do when you are in this situation is to pretend that everything is OK until one day your situation becomes a financial emergency. You have probably heard a lot of negative things about bankruptcy. Maybe you have heard from others that you will never be able to buy anything on credit again. But what if I told you that on average, people who file bankruptcy can rebuild their credit in as little as 3-4 years?  That’s right.  Although it can be reported on your credit for 7-10 years, the effects of bankruptcy rarely last that long unless you allow it to happen.  Bankruptcy is a beginning, it’s not the end of the world.

After bankruptcy, there are positive steps you can take to rebuild your credit. Most people who file bankruptcy have a tarnished credit rating anyway due to late payments, collection accounts, lawsuits, etc. on their credit report and as long as they remain delinquent, creditors continue to report them to the credit bureaus month after month. Filing bankruptcy stops the reporting of negative information. While payment history accounts for 35% of your credit score, 30% accounts for how much total debt you owe. If bankruptcy wipes out most, if not all your debts, your debt-to-income ratio improves over time.

Filing for bankruptcy protection automatically stops all creditor actions such as harassing phone calls, collection letters, lawsuits, wage garnishments, foreclosure, and repossession.  Generally, there are 2 types of bankruptcy for individuals. You can either wipe out debts you can no longer pay (Chapter 7) or you may consolidate all your debts into one low monthly payment and pay your creditors based only based what you can afford (Chapter 13). Which chapter is right for you will depend on your income, expenses, assets, and your objectives in filing- among other things.

If the COVID pandemic has resulted in the loss of income which has made it difficult for you to keep up with all your bills, you’re not alone. The first thing that you need to do is to protect yourself and your family before anything else. If bankruptcy has become necessary for you to survive financially during this difficult time, there is no shame in doing what you need to do to ensure your family’s financial safety.

Bankruptcy relief can be your first step in rebuilding your finances, your credit and your life.  Remember that your past doesn’t equal your future. You have the power to change your life by taking action now. If you have not read my book, “What You Need to Know Before Filing Bankruptcy”, you can download it free of charge at www.beforefilingbk.com.

For a free evaluation of your case, please call our office at Toll-Free 1-866-477-7772 to schedule a free consultation.

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NOTE: Due to the virus lockdown, I am currently offering consultations via phone or video. Please call the office to schedule your appointment with me. Questions? Email me at [email protected]

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None of the information herein is intended to give legal advice for any specific situation.  Atty. Ray Bulaon has successfully helped over 5,000 clients in getting out of debt. For a free attorney evaluation of your situation, please call RJB Law Offices at TOLL FREE 1-866-477-7772.

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