Summary: If you’re laid off, be sure to talk to your creditors about possible deferments. Chapter 7 bankruptcy forgives most unsecured debt, including credit cards, loans, medical bills, etc. If you need to catch up on past-due mortgage payments or past-due car payments, Chapter 13 may be a better route.
Bankruptcy may be able to help if or when you lose your job.
Unemployment in the US right now is higher than it has been since the Depression. I am not trying to create fear or desperation. This is not the first time East Texas has seen an oil crash or a pandemic (Spanish Flu in 1917). But it has been a while. So, if you have been temporarily laid off or lost your job permanently, pull yourself up by your Texas bootstraps. Make the best plan that you can. Here are some suggestions:
- Don’t panic if you are laid off
- Set priorities
If you have been laid off, set your priorities. Make out a budget to pay for the essentials only. If you have a home mortgage, contact your servicer and request ask if you can skip payments or possibly get a loan modification to lower your payments. Do the same thing on your vehicle payments. The CARES Act (new Coronavirus law) federal home lenders have to work with you. Most car creditors will voluntarily work with you. If you have credit card debt or bank loans where you have not pledged property, pay them last.
Communicate With Your Creditors
Under this new law, if a creditor makes an agreement to work with you, the creditor is not allowed to report the payment as missed or late to the credit bureaus. Try calling your creditors and working out temporary deferments.
Don’t Borrow Money Against Your Home or Cash in Your IRA, 401k, or Life Insurance to Pay Unsecured Debt
Do not take out a home equity loan or cash in your IRA or 401(k) if you have a large amount of credit cards or loans and pay them off. If you know you need to file bankruptcy, most unsecured debts can be discharged. Almost all 401(k)s, IRA’s, and life insurance are exempt as long as you leave the money in them.
Filing Bankruptcy May Help
If you qualify for bankruptcy, you may have the option of filing a Chapter 7 bankruptcy. Chapter 7 bankruptcy forgives most unsecured debt — credit cards, loans, medical bills, etc. Chapter 7 will not help you catch up on a car payment or a house payment. You may need to think about giving up one car if you know it is going to be a long time on unemployment benefits. Right now, the CARES Act Pandemic Unemployment Benefits end in July 2020.
You may also have the option of a Chapter 13 bankruptcy. This type of bankruptcy is designed to help you catch up on a past-due mortgage payment, past-due car payments, and in general, reorganizes your debt to help your cash flow. Most of the time, Chapter 13 won’t lower your regular loan payment, but it can help you get caught up on arrears.
Start Planning Now
Start learning options now. With bankruptcy, you may need to do some planning that will take time. Talk with an experienced bankruptcy attorney about whether bankruptcy will help. Don’t cash out your retirement account or start selling major assets until you get some advice. This can create problems if you do need to file bankruptcy.
We Are in This Together
The next few years will be hard on our families. We will recover from COVID-19 and the oil crash. Come up with a workable plan. Make the most of what you have. Don’t waste money with wrong moves. Learn more about how bankruptcy may help you. Make sure you know what to do and not do if you may need to file bankruptcy. We are here for you. Reach you today for a free consult if you lose your job.
Ready to find out whether bankruptcy can help you?
Complete our free, online debt evaluation form or call/text our office at (903) 759-5922. You can also email Carol@CrossStone.com. Find out if bankruptcy is your best option and whether it will help you.