While America is still navigating the reality of living in a worldwide pandemic, the fallout of the quarantine has yet to fully realize the economic impact that the economic shutdown will have on individual families. As of now, there’s a moratorium on evictions and foreclosures, but there is no such moratorium on car repossessions or other types of loans.
For those who are deeply in debt, the only reprieve they have is that the courts are operating at reduced capacity and civil lawsuits (like the kinds you see filed by creditors against borrowers) are being placed in the queue for the time being.
But this does little to assuage the anxiety of those who don’t have any income coming in and are struggling to pay their monthly utilities, mortgage payments, rent, or car payments.
Will Congress Pass Measures to Protect Citizens from Creditors?
Congress has already passed a couple of measures to protect citizens from debt collectors during the quarantine. As mentioned earlier, there is a moratorium on foreclosures and evictions, but that’s about it. Individual states have passed individual protections for citizens in those states, but there is no uniform system for dealing with debt issues incurred because of the coronavirus.
Yet many speculate that there will be. The question then becomes: What would that look like?
What Will the Coronavirus Debt Relief Package Look Like?
Currently, many Americans have found themselves laid off from work. These Americans can file for unemployment and receive expanded benefits. But for how long? Already, some are complaining that those on unemployment are making more money than workers who have been considered “essential.” The governor of New York, Andrew Cuomo, has also instituted a policy stating that utilities may not be cut off during this time—and that includes internet access.
Yet while the quarantine protocol remains in place, bills, mortgages, rent, and car payments are still accruing debt and nothing that Congress passes is likely to change that simple fact.
What Congress can do is force mortgage lenders, car lenders, and others to renegotiate the terms of the loan. In other words, instead of foreclosing on your home, they would offer a plan that would allow you to pay off your current monthly expenses plus repay the arrearages (potentially with interest).
Congress can further set some sort of bar that mortgage lenders would have to meet or exceed in order to begin foreclosure on a home in the wake of the coronavirus. But we don’t have any idea what the terms of that will be and further, some Americans may find themselves in a very difficult financial situation as the economy attempts to heal from operating under a reduced capacity.
Lenders Are Likely to Offer Borrowers Deals
Lenders are generally willing to entertain a deal to extend a loan term and reduce monthly payments, but they will need some evidence of earned income. Lenders will also expect borrowers to repay any arrearages on their loam, but this amount can be prorated over the entire term of the loan.
Those who have missed mortgage or car payments are advised to contact their lender to discuss their financial situation. If the lender determines that you are unable to pay, they may initiate a foreclosure, but that foreclosure will have to happen sometime in the future.
Can Bankruptcy Help?
Bankruptcy can help in a variety of situations. In fact, it’s very likely to help millions all across the country out of this situation. However, Congress may have a vested interest in preventing the courts from being flooded by a wave of bankruptcy filings. So there may be some attempt to mitigate or limit the impact of these bankruptcies on the overall economy.
In order to do that, Congress will need to provide the relief necessary to individual consumers during the coronavirus crisis. Thus far, unless you lost your job because of the coronavirus, you will only be entitled to receive a $1,200 check, which is unlikely to make a dent in the losses that many Americans are experiencing now.
How Could Bankruptcy Help?
For those who have been meeting their monthly expenses by putting them on credit, bankruptcy may be able to discharge that debt in Chapter 7. In other words, any debt incurred during the coronavirus crisis may be wiped clean in Chapter 7.
Creditors, knowing this, may be willing to offer reduced fees or interest or negotiate settlements for a portion of the debt so that they could at least recover something. In the post-coronavirus economy, debtors will have some leverage when it comes to debt settlement.
Can I Save My Home?
Even as there is a moratorium in place on foreclosures that displace families, that situation will not last forever. For those who have only a fraction of their income coming in, the situation could turn sour very quickly if they cannot secure new employment in the post-coronavirus economy.
Those who find themselves in that tricky situation still have options available to them. As an example, Chapter 13 bankruptcy could force the bank to renegotiate the loan allowing you to repay arrearages over a three- or five-year period.
Will the Bailout Help?
There’s no way to know for sure whether or not the bailout will have the desired impact and stabilize the economy during this period. However, lawmakers appear willing to do everything they can to keep the flow and exchange of money going. How long this could last is anyone’s guess, but so long as bills and loans are getting paid, both creditors and borrowers are happy. But obviously, Congress can’t keep cutting checks to consumers and companies simply to keep the ship from flooding. Eventually, there will be a reckoning.
Talk to a Kennesaw Bankruptcy Attorney Today
If you’re worried about your finances in the age of the coronavirus, you are not alone. There will be thousands if not millions of people who have no recourse other than bankruptcy to deal with their crippling debt. If that describes you, call The Roger Ghai Law Office today to learn more about how we can help.