Bankruptcy and COVID-19

The economic shutdown ordered by the New Jersey governor has closed thousands of our businesses and put hundreds of thousands of our residents out of work. To date, many have not been able to obtain unemployment compensation due to the inadequacies of the State government. For the self employed and gig workers, there is simply insufficient coordination between the Federal and state governments to allow them to file for unemployment to date. Small businesses are unable to obtain financing to stay alive during this pandemic

I am truly sorry for all of the suffering that the shutdown has caused, but ultimately, bankruptcy may be a solution if you are unable to pay your debts because of the shutdown

If you are a small business owner, just keep in mind that whatever you borrow must be paid back. And if you cant, bankruptcy may be an option

For homeowners, many banks have agreed to provide some mortgage forbearance, meaning that you can request to reduce or defer your mortgage payments during the 90 day period announced by the Governor. However, the payments will not go away and it is important to read the fine print because if the missed payments are not put on the back end of the loan, they will need to be paid at the end of the 90 days

Similarly, the State government cannot prevent landlords from charging their tenants rent. If you do not pay your rent, your landlord can file eviction proceedings against you. The Governor has implemented a hold on lockouts for a period of 60 days, but after that, you can be evicted and removed from your rental home, unless you can come up with the back rent

Our best advice is to pay your rent and your mortgage as best you can during this crisis. If when everything is said and done, you are unable to pay your other bills, Chapter 7 bankruptcy may be a viable option for you to get a fresh start. But filing bankruptcy will not erase past due rent, so if you wish to stay in your apartment, then paying the rent should be your priority, because filing Chapter 7 will not solve the past due rent or a pending eviction

Similarly, your focus should be on paying your home mortgage as a priority over your other bills, which can be discharged in a Chapter 7 bankruptcy. If you are delinquent on your home mortgage, you would then need to file a Chapter 13 petition and plan which is more costly and can last for up to 5 years

It is obvious too soon to tell whether you will need to file bankruptcy due to the COVID19 pandemic. But we sympathize completely and offer the above guidance as a start.

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Charles D. Whelan III has been committed to excellence for over 30 years. With offices located centrally in New Jersey, he is able to provide businesses and individuals with excellent legal services.

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