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No Rush To File Bankruptcy

By Cathy Moran

file bankruptcyWhen the virus steals your income, it’s easy to be overwhelmed with unpaid bills and terrifying economic uncertainty.

Immediate relief by filing bankruptcy may look appealing.

Make it all go away, you say. I’ll never pay this off.

But not so fast.

With few exceptions, this bankruptcy attorney thinks it’s too early in this pandemic to think about filing bankruptcy.

Here’s why.

Creditors have few remedies

In the short run, unpaid creditors can’t do much about non-payment.  Courts are essentially closed, lawyers are at home, and sheriffs have been ordered to stand down.

The normal legal remedies for non-payment simply aren’t available.

And few creditors think that hard ball tactics and lawsuits are actually going to make money magically appear.

We’re not at the bottom

One of  my indicators that it’s time to file bankruptcy is when you know you’ve hit the bottom.

When things are looking up and your future income is exposed to past debts, then it’s time.

Relief in bankruptcy is a rationed item:  you can only file Chapter 7 every eight years, and Chapter 13 slightly sooner, but not at will.

You don’t want to shoot your wad too soon.  Move too quickly and you may find that more debts accumulate but you’ve already played the bankruptcy card.

Today’s debts dischargeable tomorrow

You needn’t worry that you have to file bankruptcy before you are sued, or before a judgment is entered, or even before your bank account is levied.

At any point in the life of a debt, the debt can be discharged.  Assuming it’s a dischargeable debt, which most are, its age or procedural posture makes no difference.

Governmental action may change the picture

Given the massive nature of the COVID-19 recession, further action from the government to stabilize the economy and protect the millions of people affected is assured.

The shape of that assistance, the size of the help, and whether it actually keeps people from needing bankruptcy, it’s too soon to know.

But this bankruptcy veteran is counseling that we take it slow and understand the lay of the land before rushing to bankruptcy court.

More on Coronavirus economic survival

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Filed Under: Consumer Rights Tagged With: 2020

About Cathy Moran

I'm a veteran bankruptcy lawyer and consumer advocate in California's Silicon Valley. I write, teach, and speak in the hopes of expanding understanding of how bankruptcy can make life better in a family's future.

Chapter 13 available to more

About The Soapbox

You've arrived at the Bankruptcy Soapbox, a resource of bankruptcy information and consumer law.

Soapbox is a companion site to Bankruptcy in Brief, where I try to be largely explanatory and even handed (Note I said "try").

Here, I allow myself to tell stories and express strong opinions on how I think law should work for the consumer and small businesses when it comes to debt.

Moran Law Group
Bankruptcy specialists for individuals and small businesses in the San Francisco Bay Area

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