Bankruptcy during the Coronavirus shutdown
In San Diego the Coronavirus is growing and the number is likely to grow as more people are able to be tested. While the public health threat is the priority, there are also the economic impact it will have. Businesses around the world are shutting down to the public, and the stock market has dropped to historic lows. Uncertainty causes panic. This in turn causes a snowball effect – or an avalanche, depending on which event we mean. As serious as it is, it is looking like it has a finite shelf life. So, does the pandemic create the need – to file bankruptcy during the Coronavirus shut down? If you find yourself unemployed or with medical bills that are out of reach timing has never been more key.
DO MOUNTING BILLS AND A DROP IN INCOME SIGNAL THE TIME TO FILE BANKRUPTCY?
Bankruptcy in San Diego is a powerful weapon against creditors. But filers typically only get one shot at it. It’s crucial that filing bankruptcy during the Cornovirus shutdown to make it count. For some, things are inevitably going to get worse before they get better. Take care of the family and those around you . Those that consider bankruptcy during the Coronavirus shut down may be wise to wait until you have reason to believe that at least the worst is past. The hard truth is there is a limit to what creditors can do, during the next few months. One can only file Chapter 7 (the most common chapter of bankruptcy) at eight-year intervals. (*/For the vast majority of filers, it’s a once in a lifetime experience.)
Current income shortfalls may last months, though. That means more and more unpaid bills will pile up, for many. But consider this one brief example. Let’s say John and Jane Deer worked in a restaurant and hotel, respectively, but were laid off. They filed bankruptcy today. That’s because even though they are current on their car payments and rent, they can no longer pay their credit cards, student loans AND all their other expenses. But if one of them became ill due to the Coronavirus and became hospitalized, they will have big medical bills. Until we see some light that this is ending, waiting though difficult,it is to your advantage.
EVICTIONS, BANKRUPTCY AND THE CORONAVIRUS?
Governor Newsome has proclaimed that California cities may enact local their own local rules on evictions. The City of San Diego has done that by unanimous city council vote. It imposed a moratorium on evictions related to the coronavirus outbreak. An article in the San Diego Union Tribune published online March 17, 2020 reports that a renter must show “proof of loss of income or burdensome medical bill” in order to qualify for this local relief. The city will “work to make sure” [landlords] “were financially shielded” from the effects. (Ibid.) The council apparently did not provide the SDUT any further details. Landlords have no protection from foreclosure if they cannot collect enough rent to pay their mortgaged properties. Landlords may find themselves eligible for and in need of bankruptcy services.
Not all eviction proceedings will be covered by a local exception. These will slightly complicate a bankruptcy proceeding, but landlords have a bit of an advantage in bankruptcy court.
FORECLOSURES AND THE CORONAVIRUS
Here is a bit of good news. Federally-backed mortgage lenders (that’s HUD, FHA, FREDDIE MAC and FANNIE MAE), as of March 19,2020, have declared a sixty-day moratorium on foreclosures. (Credit: articles released by the Associated Press March 19, 2020 and articles appearing in the Wall Street Journal, Politico and USA Today on March 18, 2020.)
WHO SHOULD FILE BANKRUPTCY NOW?
Those whose assets are in immediate danger of being seized by creditors probably cannot wait. They should take care, though. Some (not my clients, of course) file bankruptcy and get only a brief reprieve. All they do is set up a temporary roadblock to creditors. For example, secured creditors like auto and mortgage lenders can still repossess or foreclose even during a Chapter 7 bankruptcy. (It’s different in a Chapter 13 with an approved plan.) The lender just has to jump through an additional hoop to get it done. If you have significant cash savings and / or other non-exempt assets (not retirement accounts) AND a creditor sues you, your assets could be in jeopardy.
WHAT CAN I DO SHORT OF FILING BANKRUPTCY WHILE THE PANDEMIC AFFECTS ME?
Reach out to ALL of your lenders – credit cards, mortgage, auto and student loan. When you are able to get through, explain your situation and request lender(s) defer your payments. Lenders are sensitive to the pressure to accommodate borrowers as sort of a carrot-and-stick strategy by the government. If you’re successful, you can ride out the temporary hardship with a bit less anxiety, a little more cash in your pocket and your credit score unaffected. (You will have made your payments “as agreed” if they are deferred.)
HOW TO CONSULT WITH A BANKRUPTCY ATTORNEY DURING THE “SHELTER IN PLACE” ORDER?
We can schedule for IN-PERSON MEETINGS. We’ll just have to make sure we calendar yours on a later date than the governor lifts the “shelter in place” order. OR, we can conduct the consult via video chat / screen-sharing services like ZOOM, GO TO MEETING, FaceTime and SKYPE.