Bankruptcy Can Provide Relief To Consumers Affected By Covid-19
The sudden interruption of the U.S. economy caused by Covid-19 has affected countless households, leading to unemployment, furloughs, and business closures. Without regular income, even with a portion available through unemployment insurance, many households have likewise fallen behind on paying bills, submitting loan payments, and staying up on regular expenses. The pandemic has left many families in financial shambles. For the thousands of Ohioans in households whose main income earner contracted COVID-19 and ended up enduring hospitalization or succumbing to the virus, income interruption led to missed payments on everything from home loans and rents to car loans, student loans and utilities.
Any household having dealt directly with COVID-19 will unfortunately have to deal with the financial problems that it creates. Besides the income interruption it causes, it likely also generates tens of thousands of dollars in medical bills.
Even with health insurance, many insurance policies require the consumer to pay the first $5,000 to $10,000 of their bills. Without insurance, the medical expenses, even without hospitalization, can reach $30,000 to $40,000 in less than a week.
For Ohioans lucky enough have a decent medical insurance policy, annual premiums, copays, and deductibles can still add up to $10,000 or more a year for a family.
Many Ohioans have never seriously investigated personal bankruptcy options. Consequently, many falsely believe bankruptcy can’t do anything when they feel overwhelmed by medical debts and hospital bills. In reality, bankruptcy might be the best option to eliminate such devastating debts.
Credit and Retail Cards
Individuals and households not contracting COVID-19 may still struggle with credit and store card accounts. As the economic fallout from the pandemic reaches into every community, income reductions and interruptions mean families may need to choose between making their car payment and buying food, or between paying college tuition for a child and making a credit card payment. Many Ohioans have leaned more on their credit cards and store cards to pay for routine. In these situations, it may best to take advantage of the bankruptcy system to obtain a fresh start or get into an affordable payment plan.
Since Great Recession, home prices have again rebounded and, in many areas, outpaced both inflation and income growth. Many households have been pushed to the financial brink due to the combination of higher home prices and an economic downturn.
Saving a home from entering foreclosure is one of the most common reasons individuals file bankruptcy. When successful, a chapter 13 bankruptcy will still require the homeowner to continue paying their mortgage, but will that allow the borrower to stay in the home while the payment arrearage is cured over a period of 3-5 years.
Before the pandemic, many consumers found themselves paying for a vehicle whose value was far less than what was owed on the loan. When consumers with such transportation costs see their income drop by 50% to 70% due to unemployment or furloughs, it comes as no surprise that auto loan defaults are on the rise. Repossession, like foreclosures mentioned previously, are looming large.
While consumers with large car payments may find it more prudent to surrender their vehicle in bankruptcy, many often choose to keep their car, truck or SUV and continue making monthly payments. In some instances, Chapter 13 bankruptcy may allow borrowers to pay the actual value of the vehicle, rather than the total loan balance and reduce the interest on the loan.
Contact a skilled bankruptcy attorney to help with your case. A bankruptcy lawyer can give you more guidance on how to handle the complex financial issues caused by the pandemic.
Wood & Brewer Bankruptcy attorneys are here to help our community recover from the financial hardship that you are going through. We invite you to contact us today for a free bankruptcy consultation to see what options you have to get out of this financial stress.