Now is a time of financial struggle unlike many have ever seen before. We’re facing a pandemic that has closed businesses of all kinds for an indefinite period and left many of us wondering how we can possibly continue to take care of our financial obligations.
There’s so much information and you keep hearing there are financial resources available but you can’t seem to find any relief. You keep hearing a mixture of facts and none of it really makes sense to you. It’s so hard to determine what’s true and what will really help you….and fast.
This isn’t the first financial crisis our country has seen but rather one that has caught us off guard. Bankruptcy is often looked at as a dirty word but I’m here to tell you that it might just provide you the relief you need.
I’ve worked in bankruptcy for many years and through many different national crises. I have some tips that you might just find helpful for your situation.
CARES Act Explained
The CARES Act (Coronavirus Aid, Relief, and Economic Security Act) was quickly enacted in an attempt to reduce the effects of an economic fallout due to the pandemic. This is a multi-faceted act that also provides some potential relief for small businesses.
We encourage you to seek professional guidance as some options are certainly better than others. Let’s break these down a bit.
PPP Loan
The PPP Loan is a Paycheck Protection Program put forth from the CARES act. The money is intended to be spent in order for small businesses to continue to pay employees. The money can be used for rent, utilities, interest, and payroll costs.
This loan has an interest rate of only 1% as long as you follow the criteria set forth in the loan. It’s meant to help keep small businesses afloat while also continuing to pay their employees. A small business can borrow up to 2.5 times above their payroll expenses.
Disaster Relief Loan
This is a loan that is backed by the Small Business Administration (SBA). This loan can be extended into a 30-year term and will have an interest rate no higher than 4%. These loans are available to businesses, renters, and homeowners alike if they are in an area with a declared disaster.
401K Withdrawals Penalty-Free
Another option is to make a withdrawal from your 401K penalty-free. Rather than pay a penalty and taxes immediately, you can break out the taxes and pay them over a 3-year period.
While this is an available option, we certainly don’t recommend it. This should be a last resort option because it means you’re pulling money away from your retirement savings that you may never be able to restore.
Even in bankruptcy, your creditors cannot touch your 401K, it is protected. Any debt you might use this for is dischargeable in bankruptcy.
Foreclosure Moratoriums
Most states have currently enforced foreclosure moratoriums. This means that foreclosure is currently forbidden by law in the majority of states. These moratoriums range in time but most of them are 60 days. This means no foreclosures and no sheriff’s sales during the enforced time period.
Be sure to check local jurisdiction for the specifics in your area.
Eviction Moratoriums
As with foreclosure, many courts have also placed eviction moratoriums. This means eviction court proceedings are currently forbidden. This does vary by area, so be sure to check your area for more information.
Bankruptcy Proceedings
Fortunately, bankruptcy proceedings are still taking place. If you need relief during this time, this could still be a valid option for you. Bankruptcy could help to relieve you from obligations like credit cards, unpaid rent, overly high car payments, medical bills, and other debts due.
Bankruptcy protects your retirement funds as well as any current income and your paycheck when you are able to return to work.
We encourage you to seek professional guidance in your time of need. The professionals can help you determine which bankruptcy chapter is right for you and how to protect your family in the process.
We are here to help you not only survive but also be able to recover from this crisis. Give us a call today.
