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Exploring Bankruptcy Alternatives During the Pandemic

The pandemic has affected all of us in many aspects — whether it be physically, emotionally, mentally, and even financially. A lot of businesses weren’t able to survive the drastic effects of COVID-19, which led to employees losing their jobs and their only source of income.

This translates now to financial difficulties — after all, life still goes on. There are still bills to pay and debts to settle. Although there have been programs delivering financial aid to affected individuals, the relief does not last forever.

The financial toll of the pandemic has led many people to file for either a Chapter 7 or Chapter 13 bankruptcy in an effort to discharge their debts or be provided with a payment plan to give them a little bit more time to pay. But before you file for bankruptcy, consider some alternatives that can help you survive financially in these trying times. 

1. Pay minimum credit card balances 

Credit cards may seem like the way to go during financial crisis situations, however, you need to be careful with using your credit card for all your expenses. It’s easy for your balance to get out of hand, especially if you’ll be making credit payments for daily living expenses. 

As much as possible, use cash to avoid ballooning your credit card debt and spending money on inflated interest rates. Pay only the minimum on your credit card balance to lessen your tendency of using it too often. Doing this will also help you maintain a good credit score. 

2. Talk to your mortgage lender 

Probably the biggest and most daunting expense for you right now is your mortgage. If you’re struggling to make ends meet and make monthly mortgage payments, you should talk to your mortgage lender as soon as possible. 

Don’t wait until you miss a payment before discussing matters with your lender or service provider. The same applies when it comes to paying your monthly rent. Missing your payments without informing your lender or landlord can prompt the latter to report your missed payments, which will affect your credit score. 

Talking to your mortgage lender or landlord will ensure that they know your financial situation. Perhaps you can come to an agreement that benefits both parties considering the financial toll of the pandemic. Some options include:

  • Extending forbearance for mortgage relief. Pursuant to the CARES Act, you can ask your lender to put your mortgage in forbearance or extend it. 
  • Mortgage modification. Your lender may allow a change of terms in your mortgage contract, especially if your home is worth less than what you owe. It’s worth asking them if this option is possible. 
  • State and federal assistance programs. You may be eligible for assistance programs that excuse you from paying rent during the pandemic. One example is Section 8 housing. Talk to your landlord about it and ask if they can provide you with these relief options.

3. Look for a side hustle or other sources of income

The pandemic forced employers to work from home or start online businesses. If you lost your source of income because of COVID-19, you can consider developing a side hustle or looking for work-from-home opportunities. There are a lot of different jobs available online that allow you to work remotely. 

Think of the skills that you have to offer and browse for job opportunities online. Some platforms that you can check out include: 

  • FlexJobs
  • JustRemote.Co
  • Remote.Co
  • Upwork

Or you might have hobbies that can turn into money-making ventures! Just make sure to do your research beforehand and study the opportunities available for you. 

4. Explore income-based repayment (IBR) options for student loans 

There are income-based repayment options available as a form of relief from student loans. Those interested can easily apply online and surrender their last tax returns for evaluation. Don’t forget to indicate that the pandemic has rendered you unemployed or underemployed and has limited your capacity to settle your student loan. If your application is successful, your student loan can be reduced based on your present income. 

5. Trade-in your car with a less expensive one 

To survive these trying times, it’s necessary to take a look at our current lifestyles and determine what expenses we can trade-off or eliminate to save more money. Since you’re spending most of your time at home, your car might just be sitting in your garage but still costing you monthly car payments. 

At this point, you can consider selling your vehicle and trading it in for a more affordable car. You can always buy another car when your financial situation improves and the economy bounces back after the pandemic. Or you can speak to your auto insurance carrier and ask for a temporary discount. 

The pandemic has greatly threatened our lifestyles, especially our financial situations. Before taking drastic measures like filing for bankruptcy, you can explore these alternatives. Otherwise, it’s advisable to hire a bankruptcy attorney to help you come up with a financial strategy to survive in these trying times.

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Jennifer
Scott

Partner - Domestic Relations

Boulder