Deciding whether or not it’s the right time to file for bankruptcy is a difficult decision in the best of times. The decision only becomes more difficult during these unprecedented times of pandemic and economic crisis. There are several things that need to be considered by anyone thinking of filing for bankruptcy while the Coronavirus remains a global issue.

Courts Are Open But There Will Be Delays

Filing for bankruptcy requires constant contact with the federal court for the district of New Jersey. Unfortunately in these times of social distancing most courts are either delaying proceedings or continuing remotely where possible. Nevertheless, the bankruptcy court currently remains open in a limited capacity, and will still accept new bankruptcy filings electronically. 

It should be noted that limited staff at the court will cause delays in processing new petitions, and it’s still possible that the court will close entirely if the situation with coronavirus worsens. For those that have already filed for bankruptcy, certain parts of the proceeding will need to be conducted remotely, and all motions and contested matters will be “heard on the papers,” meaning that oral argument for a specific matter will have to be requested and permitted by the judge. 

If an individual is concerned about delays in their bankruptcy proceeding or whether it makes sense to file now, it’s best to consult with a bankruptcy attorney that is in contact with the courts on a regular basis.

Unemployment Benefits will Affect Eligibility

The $2 Trillion CARES Act recently passed by Congress includes some substantial benefits for those applying for unemployment assistance, including an additional $600 per week to everyone that qualifies for benefits. Anyone filing for bankruptcy will need to first pass the means test to make sure that they qualify based on their monthly income.

This calculation is made by averaging all of a person’s sources of income for the six months prior to filing, including any unemployment benefits they are currently receiving. Therefore it’s possible that someone receiving the additional benefits of the CARES Act will push their income above the allowable amount to qualify for Chapter 7 bankruptcy, and either have their case converted to Chapter 13 or dismissed.

Investments and Retirement Accounts are at Risk

The Coronavirus is also wreaking havoc on global financial markets, causing major impacts to investments like pensions, 401k’s and IRA accounts. An individual’s investments will be affected differently depending on which chapter of bankruptcy they are filing under, Chapter 7 or Chapter 13, as well as which set of exemptions the individual chooses to apply to their case.

It’s important to have a complete and accurate understanding of one’s personal finances as well as the different bankruptcy rules before making the decision to file. Anyone looking to protect an investment or retirement account should consult with an attorney before filing a bankruptcy petition.

Domestic Problems may Cause Issues

Sadly, our health and finances aren’t the only things being affected by the global pandemic. It’s now being widely reported that social distancing measures and the stress of dealing with a world in panic will lead to a spike in divorces across the globe. Divorce can have wide ranging impacts on a bankruptcy proceeding, affecting everything from available income and assets to an individual’s share of a given debt.

In addition, certain “priority debts” like child support and alimony are considered non-dischargeable in bankruptcy and will continue to be owed after the completion of the bankruptcy proceeding. Anyone currently going through a divorce or thinking of the future possibility of a divorce should consult with an attorney before filing for bankruptcy to determine what effects it will have on them during and after the completion of the proceeding.

The decision to file for bankruptcy is never an easy one, and the current times have added many more complexities that need to be considered before filing. At Rosenblum Law our attorneys are ready to help with a completely free bankruptcy consultation, call us today.