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Why You Should Start Planning Your Personal Bailout Now

Nearly two months after Coronavirus exploded on the scene, some states are starting to relax stay-at-home orders, and people are slowly returning to work. It will take a lon time for the economy to recover, and  some White House advisers  are still predicting a 20% unemployment rate.

People are wondering if  the jobs they held prior to the COVID-19 crisis will still be there after things settle down. Economists argue about how many jobs will come back after the pandemic ends.

Prior to the outbreak of COVID-19, the financial press was praising the benefits of the “gig” economy. Uber drivers, Instacart shoppers and other freelancers could set their own hours and get paid in cash daily. Now, gig workers are among those hardest hit by the Coronavirus pandemic. 

Gig workers usually have no benefits–like sick leave, paid time off and insurance–that most salaried workers take for granted.

Congress passed a Stimulus Package to help Americans survive the economic downturn, but for most people, a one-time $1,200 payment is not enough to survive. There has been some talk in Washington about the second stimulus payment, or even monthly payments during the pandemic. But some government officials are warning that there is “not enough money” to help everyone.

So, what can be done to get relief during these extraordinary times? Many national retailers have filed bankruptcy, or soon will.  J. Crew and Neiman Markus have filed and JC Penney is getting ready to file Chapter 11. Over the weekend, Stage Stores filed for bankruptcy protection from its creditors; in Florida, its stores go under the name “Bealls.”

Corporations have used the bankruptcy code as a way to bail themselves out financial straits for decades.  Individuals can also use bankruptcy law to get a fresh  start. In an interview with a then 80-year-old St. Augustine grandmother in 2008, a a national news magazine asked:

What do Wall Street titans have in common with Ada Noda, an 80 year-old grandmother? They have all found themselves deeply in debt and desperate for a way out. From her mobile home in St. Augustine, Fla., Noda told NEWSWEEK, “My outflow was more than my intake.” (The magazine titled the article, “Grandmother has a bailout lesson for Wall Street.”)

With her cash outflow exceeding her intake, Noda fell behind on her bills, most of which were medical bills. The debt collectors were relentless, calling her all day long. They even harassed her over her dead husband’s debts. They told her that she was legally liable for her dead husband’s bills. This was not true.  (In most cases, you are not responsible for your dead spouse’s debts.)

Many economists are anticipating a surge in the number of Americans who will use bankruptcy to protect their income and assets-and to discharge their debts.  One bankruptcy judge in Florida tweeted that economists at the United States Bankruptcy Court see the surge coming in about 6 months.   Judge McEwen believes that people are waiting to file bankruptcy, so that they can include all COVID-19 related debts in their case.

There are financial moves that people make before filing bankruptcy which could impact their case, or their ability to file a case at all. Now is the time to know what one should or should not do before filing a case. Many of these decisions have to do with spending (or borrowing) large sums of money.  Consumers who receive tax refunds and stimulus checks usually spend them pretty quickly; the government sought to stimulate the tepid economy when it decided to send these payments.

If you are contemplating filing a bankruptcy, you should not do any of the following:

  1. Pay back relatives who lent you money (some debtors pay back relatives with tax refunds or stimulus  checks. This could lead to trouble for you and your relatives.)
  2. Pay-off automobile loans.  (In Florida, the automobile exemption  is very low, and paying it off could force you to have to buy the car again in bankruptcy).
  3. Running up credit cards  before you file your case. (This can be viewed as fraud and cause those debts to not be discharged, or cause you to not get a discharge at all.)
  4. Transfer or give away property before you file your case. (Many people think that if they give away their property, say a car, before they file bankruptcy that the trustee will not be able to take the property from them. The trustee can un-do these transfers and bring the property back into the bankruptcy estate.)
  5. Make large gifts to anyone, especially not relatives or business associates. (People who are not solvent and and unable to pay bills should not give away their assets.)
  6. Start contributing to a retirement fund or charity right before you file bankruptcy. (If you start to do this right before you file, the trustee could object to your discharge.)
  7. Tap your retirement funds to pay off unsecured debts like credit cards. (Retirement funds are almost always exempt assets and should never be touched to pay dischargeable debt.)

There are things that you should do before you file bankruptcy. First off, scheduled a consultation with an experienced bankruptcy attorney. Ask him or her how many bankruptcy cases he or she has  handled  and if he or she has filed any cases recently. Research your lawyer. Do not just Google “bankruptcy lawyers” in my area. Many firms pay Google or third parties to make sure that they are in  the top search results; that does not mean that they are good (or bad) at handling these cases. Google should never be your sole source for choosing a lawyer.

Start gathering your financial documents that  your lawyer will need (bank statements, bills, credit card statements, lawsuits, tax returns and the like). Some people contemplating bankruptcy ignore their mail or throw all bills and statements away. This is not a helpful move. Save your mail for your lawyer to determine if it is important.

Finally, start thinking about the fresh start that you will get by filing bankruptcy. The founders of this nation understood how important bankruptcy is. (In their times, one could be put in jail for not paying consumer debt.) The founders thought it so important that they put bankruptcy in the United States Constitution itself (not many areas of law are in the founding document).  Things like freedom of religion and speech were not in the original Constitution; they were added 4 years later as Amendments to the document.å

Experienced and knowledgeable Jacksonville bankruptcy attorneys can guide you through the process so that you can maximize the property you can  keep in bankruptcy  while also getting relief from  debt. Our lawyers can advise you on exactly when to file your bankruptcy case in order to protect your tax refund.  Contact the Law Office of David M. Goldman, PLLC today for a free initial bankruptcy consultation. A Jacksonville Bankruptcy Lawyer can help you decide if filing bankruptcy is best for your future.

 

 

 

 

 

 

 

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