Randall and Waldner PLLC

The Government’s Financial Bridge To Americans Is Actually A Pier With Only One Way Off

(What we need here is a little bit of misbehaving)

Losing the additional $600 per week in additional federal unemployment benefits will send many recently unemployed to file for bankruptcy protection in the coming weeks. There is much talk of what the next round(s) of relief and or stimulus payments will look like. But whatever it is, it won’t be enough for most people.  Experts agree that at least a reduced benefit extension will be passed into law, but in the meantime and as Congress lollygags, people still have bills to pay, are largely out of work, and could soon be seeing a return to normal eviction proceedings as part of each state’s remediation plans start to take root.

As Covid-19 ravishes the country, Congresses “Financial Bridge” has turned into a Pier with so many people piling on that the only place to go is into the shark infested waters. No matter how much is allocated, the extra unemployment funds will expire soon leaving it again to the Do-Nothing Congress to fumble our way out of this mess. For the unemployed who were living paycheck to paycheck, even the temporary loss or a reduction in benefits all but ensure their need to file for Chapter 7 or Chapter 13 bankruptcy protection. For the many of us “99 Percenters” it is only a matter of time.   

Being unemployed is one of the most common reasons a debtor might file for bankruptcy and, depending on the situation, might actually be advantageous to your bankruptcy case.  Most unemployed will choose to file Chapter 7 to eliminate unsecured debt. And being unemployed will often allow debtors to automatically pass the Chapter 7 means test. What’s more, filing for bankruptcy will not affect your ability to receive government benefits.  

Restructuring debt under a Chapter 13 is typically more difficult for unemployed debtors unless they have access to other sources of income and can prove that they meet the obligations of their Chapter 13 repayment plan.  The good news here for those who can afford regular plan payments while unemployed is that temporary changes to the bankruptcy code due to Covid-19 will allow for extensions of the repayment plan from the normal 3-5 years range to up to 7 years from the first plan payment.  This two-year extension should make Chapter 13 more accessible to the unemployed who need to keep their home and other assets through bankruptcy. And keep in mind that Chapter 13 can also result in the elimination of unsecured debt in order to make your payment plan more feasible. That’s a win-win.

As of the time of this writing Congress is almost certain to be late on any resolution extending the provisions of the CARES Act and further relief efforts are likely to be woefully inadequate when compared to the scope of the crisis the Covid-19 pandemic has created.  It appears we have yet to reach peak virus (or peak economic pain), but we have likely already reached the peak of the stimulus payments and the peak of Congressional compassion. How long will the government still be willing to print money just to give it away? That spigot is already tightening and you need to consider whether even paying your unsecured debts is the proper utilization of your limited funds.   With the temporary changes to the bankruptcy code expiring before we know it, it is important for the struggling masses to seek a bankruptcy consultation now.  At Randall & Waldner, we never seek to charge for your first comprehensive consultation. It is important to remember that bankruptcy helps people in financial trouble, it doesn’t hurt them, and that is something more people will need more than any other time before. So, don’t get pushed to the end of the pier by the others who, like yourself, are in desperate need for some bridge over this River Styx. It’s time you start misbehaving.