What impact will the stimulus bill have on consumer bankruptcies?
The coronavirus pandemic has brought about financial ruin for many Americans. Currently, it is estimated that over 16 million people are unemployed, a figure that might grow in coming months. The sheer number of jobs lost due to the pandemic and the ensuing shuttered businesses is simply unprecedented. Bankruptcy attorneys and other experts in the field are bracing themselves for a surge of bankruptcy filings over the summer months to come. Our Xenia, Ohio Chapter 7 bankruptcy lawyers discuss the predictions for bankruptcy filing stemming from coronavirus and the potential impact of the stimulus package below.
Job Loss Will Lead to Bankruptcy for Many
Bankruptcy filings have fallen in recent years, but household debt has continued to climb. According to the Federal Reserve Bank of New York, Americans have $14.5 trillion in household debt. Americans who therefore lose their jobs or experience a reduction in job hours may find themselves overwhelmed with debt. Unable to continue making mortgage, credit card, auto, and other loan payments, bankruptcy may become the most viable option to escape from crippling debt.
The Stimulus Bill and Bankruptcy
The $2.2 trillion stimulus bill that recently passed provides direct checks of $1,200 to Americans earning up to $75,000 and $2,400 for couples who make less than $150,000. The CARES Act additionally offers small businesses forgivable loans. Per the Act, the direct checks will not be counted as income and therefore will not be factored into the Chapter 7 means test. These checks will also not be counted as disposable income, such that could be a factor in a Chapter 13 filing.
The Act directly addressed Chapter 13 bankruptcy filers. It provides that people who are already in a Chapter 13 repayment plan who are now experiencing financial hardships due to the virus will have one year to change their repayment terms. They may also extend the repayment time frame by an additional two years.
Much uncertainty continues to surround the virus, economy, and overall future of the country. The situation is changing daily. If you are experiencing financial hardships due to the coronavirus pandemic and believe bankruptcy may be necessary to erase your unsecured debts, contact our bankruptcy lawyers at Miami Valley Bankruptcy today.