Bankruptcy in the Age of Covid - Has Covid Affected Bankruptcy Rates in 2022?

Mar 20, 2022

The financial crisis that began in 2008-2009 has worsened the problem of bankruptcy, with nearly one in three Americans filing for it in the last year. While the recession ended in 2010, many people remain unemployed, and some were still uninsured, which lead to tens of thousands of dollars in additional medical debt. As a result, people who have already filed for bankruptcy may find that they do not have many options.

Luckily, a Rocklin bankruptcy attorney will tell you that bankruptcy isn't the end of the world. In fact, in the age of Covid, filing for bankruptcy is not the end of the world, and in many cases, it can be a new opportunity to start anew. Credit card companies are also more willing to work with consumers during a recession, and they may be willing to extend payment plans or forbearance agreements. You can also look into debt consolidation, which can consolidate your debt into one account with a lower interest rate.

With Covid-19 spreading like a virus, the bankruptcy process is largely unchanged. While Chapter 7 and Chapter 13 discharge most of your unsecured debt, liquid assets must be turned over to the bankruptcy court and sold over several months to pay off your creditors. This process is overseen by a trustee, and you must make less than the median family income in your state to file. A lot of lenders will agree to work with you if you can't make the payments, but it's up to you to find out whether they will.

While filing for bankruptcy is a last resort for many, it is still the last option. A number of relief measures are being implemented by banks, regulators, and lawmakers, including the recent $2 trillion Congressional relief package that temporarily prohibits lenders from starting foreclosure proceedings on federally backed loans. You can also apply for 180 days of mortgage forbearance. Furthermore, many big banks have established hardship programs that delay payments until you can get on your feet.

Despite the current decline in bankruptcies, the COVID-19 pandemic has changed the landscape of bankruptcy significantly in 2022. This virus has increased the debt limit for businesses, which makes it easier to restructure in bankruptcy. However, the number of bankruptcies has decreased in recent years. Although the number of bankruptcies has declined, the CARES Act is still a key component of the economy.

Moreover, there is a chance that the duration of the COVID-19 outbreak affects your ability to avoid bankruptcy. In such a case, you might opt to defer payments or set aside funds for the necessary expenses. Then, you may be able to negotiate with your creditors regarding payment terms. In recent times, landlords have been very cooperative and have reduced rents for their tenants.