The pandemic has pushed many people’s finances to the limit, and bankruptcy is making headlines. But what are the alternatives to filing bankruptcy? Have you been searching the internet for answers to this question? Here’s what to know.
Last month, the New York Times ran a piece titled, “A Tidal Wave of Bankruptcies Is Coming.” The author of the article says that as the coronavirus continues to affect the economy, more and more businesses are going to start filing for debt relief through bankruptcies. The pandemic, the article reads, “exposed deeper problems, like staggering debts run up by companies whose business models were already struggling to deal with changes in consumer behavior.”
It seems like a dire situation for business owners.
It’s not only businesses, however, that are facing bankruptcy. Individuals who are struggling to make ends meet are also contending with this decision to file.
If you think bankruptcy is your only option right now, here are a few alternatives you can try first.
Put a Hold on Mortgage Payments
As many Americans have endured the strain of the coronavirus on their finances, the federal government passed the Coronavirus Aid, Relief and Economic Security (CARES) Act. Part of the goal of the CARES Act is to help protect homeowners with federally backed mortgages.
If you do not think that you will be able to make your mortgage payment this month or in the coming months, speak to your loan provider. You could qualify for suspended or reduced payments for up to 12 months.
Look into Hardship Programs
If you have credit card debt, you know that part of the worry of not being able to make your minimum payment each month is that your credit score might be affected.
The CARES Act also allows an accommodation for borrowers to pay less than the regular monthly payment without risking damage to their credit scores. Wondering, “what are the alternatives to filing bankruptcy”? This could help. It’s important to talk to your loan provider or credit card company directly about what accommodations they are willing to grant you during this difficult time, so don’t wait any longer.
Use Your Retirement Savings
We know what you’re thinking—won’t I be severely penalized if I dip into my retirement early? Under normal circumstances, you are correct. Withdrawing any amount from your retirement early will incur a 10% penalty.
However, if you are having financial hardships because of the pandemic, the CARES Act (once again) is here to help. Under it, the penalty is waved.
You should know, though, that you could still be hit with significant taxes if you withdraw from your retirement. Additionally, any money you withdraw now could seriously affect how much you have in your account when you retire.
It’s best to treat this option with the respect and consideration it deserves.
What Are the Alternatives to Bankruptcy When You Have Tried Everything?
If you feel like you are out of options, we are here to help. With expertise in bankruptcy law, business law, and accounting, we will help you come up with a plan. Get in touch with us today.