A Financial Plan for Layoffs
Many people have been laid off during the Coronavirus pandemic. A layoff can of course cause great financial instability. One solution to this instability can be to file for bankruptcy.
Clearly with a layoff comes less money with which to pay your bills. This shortfall during the pandemic has been somewhat mitigated by unemployment benefits as well as a stay on evictions and utility shut offs. Stimulus packages help for the short term.
It is vital to assess the real impact on your finances. What payments are waived and what are shifted to a later date, and if so when? Once the stay lifts, your missed rent will most likely be due.
Pay special attention to mortgage, car, and credit card payments. Many creditors will add 1-3 months of payments to the end of the loan. The government is deferring student loan payments. Check into similar options for private student loans. Plan to pay unpaid utility bills unless you discharge them in bankruptcy. Get a confirmation of payment plans from your creditors, preferably in writing.
After you have spoken with your creditors you will be better able to plan. If any current income isn't enough to make regular payments, try deferring bills. Set aside funds you do have. You will then have funds to catch up on payments, or if need be you will have emergency funds for food and other necessary items. If you have enough of this money left after the crisis,you'll likely be able to negotiate lesser payments with outstanding creditors. This may help you avoid bankruptcy.There are various financial and tax implications between negotiating debt and filing for bankruptcy. Speak with Shoffner & Associates to decide which direction is best for you.
Bankruptcy might be your best option if you can't find another financial solution through the pandemic and your layoff. Chapter 7 bankruptcy can clear or discharge debt such as for credit card balances, medical bills, and rent. Chapter 13 bankruptcy will give you 3-5 years to pay off your debt. Speak with Shoffner & Associates to determine your best financial solution through your layoff and the pandemic. Consult with them to decide on the best course of action and timing.
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Freya Allen Shoffner, Esquire
Counselors to Small Business and Families.
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