COVID-19 and Timing your Bankruptcy Filing

COVID-19 and Timing your Bankruptcy Filing

The pandemic has now been going on for over a year. To say that many families have been struggling financially is an understatement. Interestingly enough, although most families have suffered financially from the pandemic, bankruptcy filings have seen a steep decline. Despite the fact that everyone is dealing with job losses, cuts in wages and the stress of staying in their home, credit card usage and balances have surprisingly dropped. Especially near the beginning of the pandemic, consumers have tried to cut their debt so that their payments would be more manageable during this unprecedented time. According to, the average debt for consumers dropped 10% during the first 3 months of the pandemic. The first relief check, which gave families anywhere from $1,200 to $3,900, certainly had an effect on how much everyone was able to pay down on their credit cards.

In a way, it makes sense that excess spending has gone down in the past year. With a large part of restaurants closed or only offering takeout along with the amount of non-essential stores closed, consumers looked to cheaper, alternative ways of spending their time. This means that less people are using their credit cards and trying to save those funds in case of emergencies. More time with the family couldn’t have been any more affordable when everything was closed and we were all forced to stay home.

Bankruptcy filings have been on the decline since the pandemic hit. Everyone was either too afraid to file not knowing what the future holds, or families were using their stimulus or unemployment monies to pay down debts. With mortgage forbearances, most families were able to go 12 months or more without having to pay a single mortgage payment. This should have given families a means to pay down their credit cards rather than filing for bankruptcy.

It is now June 2021, with the number of COVID-19 cases declining and the vaccination rollout, it may be the perfect time to file. Here are some things to consider when you are thinking about filing:

  • If you were out of work for an extended amount of time, are you able to go back to work? Will you be able to return full time or at least the same hours as before?
  • Have you already had COVID-19 and recovered from it?
  • Have you been vaccinated?
  • Do you have a child or children that have not gone back to school?
  • Do you have elderly dependents that need care during the day but cannot receive it right now due to restrictions?
  • Did you receive a Pandemic Forbearance and need to start catching up on mortgage/rent?

All of these situations listed above could lead to you and your family incurring more debt—whether due to unforeseen medical bills or other financial obligations. Keep in mind that while in an active bankruptcy, you cannot incur debt while the case is open. We also recommend that you not make any large purchases in the 90 days before you file as well. Depending on which chapter you file and your situation, your case could be open from a couple of months to a couple of years. If you know that you will need to incur debt in the near future due to the reasons given above, you may want to wait to file your bankruptcy case at a later date. Bankruptcy should be your last resort and should only be considered if all other options have been explored.

Alternatively, if you know that you are going to start working again soon and your income will increase, it may be a good idea to consult with an experienced bankruptcy attorney to ensure that you file your bankruptcy case prior to a substantial increase in your income. There are many consequences that your bankruptcy attorney can explore with you to ensure that timing is on your side.

It is important that you understand what filing could mean for you and your family. If you are thinking about filing for bankruptcy, come in and speak with our Myrtle Beach Bankruptcy Attorney, Huong Lam at the Lam Law Firm. We will help you make the best decision for your situation. Call us today at 843-839-9995 to set up your free bankruptcy consultation.