RJB Law Offices (Ray Bulaon)

Experts Say Bankruptcy Filings Will Increase Soon: How To Prepare Yourself, Just In Case

The COVID-19 pandemic has changed everyone’s life in only a matter of months. As the virus continues to batter the economy, a lot of people are finding bankruptcy as their only way out. This is a sad reality but if you look on the bright side under the grim circumstances in which you find yourself if you are one of the millions affected, bankruptcy still offers a ray of hope so you can start over.

The last recession in 2008 caused a wave of bankruptcy cases from consumers seeking a new start after getting terribly behind on their mortgage and debt payments. Back then, foreclosures were at an all-time high after the millions of adjustable subprime loans obtained just a few years earlier adjusted to double the initial mortgage payment amounts making them unaffordable to homeowners. The Obama administration did what it could to stem the tide of foreclosures. You may be familiar with the HAMP program. A lot of my clients were able to save their homes through that program; although for some, even the modified payments still became unaffordable after they lost their jobs as the recession continued.

People don’t normally just rush immediately to the bankruptcy court in a time of financial crisis as we are facing now. They see it as a last resort, and it should be. But I also how the lack of preparation can cause big problems that could have been avoided if people just took the time to at least consult with a bankruptcy attorney at the first signs of financial trouble.

For example, a lot of people who have lost their income will often resort to credit cards and loans to keep themselves afloat hoping that they can replace the income soon. While this may work in the short term, it is rarely a good idea unless there is also a plan B. What happens is that without a plan, you can get easily buried in debt in a very short period of time if you are continuing to borrow every month. It’s even worse when you already have a lot of debt to begin with, and you just continue to dig a bigger financial hole for yourself.

Experts say that there is no doubt that given the effect of the pandemic, business and personal bankruptcies are likely to surge very soon. It’s simply a matter of time. I hate to be a gloom and doom preacher, but this is a reality that we all face and in my opinion, it is better to be prepared for what’s coming instead of being caught unprepared when the money runs out. In other words, hope for the best but be prepared for the worst. That’s more practical, in my opinion. Hope alone is not a good plan.

I have a lot of people asking me if it’s wise to dip into their retirement plans or sell assets in order to avoid bankruptcy. Yes, in some cases this may be a good option, but it all depends on your situation- your income, expenses, future financial goals, etc. If bankruptcy becomes inevitable, it is often not a good idea to deplete your savings and your assets to pay debts that you can discharge in the bankruptcy.

Consumer bankruptcies typically come in 2 types. There’s a Chapter 7 bankruptcy which allows you to protect all or most of your assets while you discharge debts that you can no longer afford to pay. And then there’s Chapter 13 which allows you to significantly reduce your debt amounts and your monthly payments to something you can afford. This helps you live within your means while you protect yourself and all your assets from creditors. In Chapter 13, you can include all kinds of debts including taxes, student loans, back mortgage payments. So if you are facing foreclosure, Chapter 13 can help you save your home.

A lot of homeowners have taken advantage of the temporary forbearance offered by their lenders for 3-6 months. Be aware that even though your lender has allowed you to skip these payments, they are not forgiven, and you will need to catch up on these payments when the forbearance period is over. I am getting calls from people who are shocked to hear that their lender is requiring to pay it all back immediately! I’m asking: What was the point of the forbearance then? If people couldn’t pay their regular mortgage payment to begin with, what makes the lender think that the homeowner has the cash to pay the 3-6 months of late mortgage payments all at once? This is insane. Not lenders are doing this. But I’m starting to hear this from some of the people who are calling me for help.

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. ***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 gethelp@rjb-lawoffices.com.

(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).