According to the Federal Reserve Bank, more than one out of 10 American families face massive debt – nearly 17 million households, and financial hardship has increased sharply during the current pandemic.
There is no confusion over why people file for bankruptcy. The mystery is over why more don’t take steps to protect themselves.
Bankruptcy filings fall during 2020
While 14% of Americans owe more than they own, fewer than 1% file for bankruptcy each year. In 2019, just over 750,000 sought Chapter 7 or Chapter 13 bankruptcy protection. During the second quarter of 2020, filings were down an astonishing 60% from the previous five-year average.
Why? Economists say bill collectors aren’t as aggressive during the pandemic, or they surmise many can reap better benefits by waiting. However, the explanation is probably much more straightforward. People lack information, are afraid or keep thinking that things will turn around if they hold off.
Consider the benefits
Too many people let the fear of bankruptcy lead to more long-term economic damage, as they needlessly drain savings and retirement accounts that would be protected if they took action sooner. An experienced bankruptcy attorney can replace the fear with sound reasoning and dispel myths that continue to discourage people, such as:
- Will I lose everything?: After consulting a knowledgeable lawyer, people are pleasantly surprised that they don’t have to give up everything they own. Florida allows a long list of exemptions under Chapter 7, and if you file for a Chapter 13 repayment plan, you may be able to keep everything.
- Will I get credit again?: While filing for bankruptcy can remain on your credit report for up to 10 years, a credit score can rebound within months of the case being discharged. Doing nothing leads to greater damage to a person’s credit over a longer period while debts continue to mount.
- Things will get better if I wait: Overwhelming debt leads to depression and hopelessness, but the thought that things will get better by doing nothing often keeps people from taking action. In many of these cases, anxiety may be mistaken for optimism.
Avoid expensive mistakes by taking action
Millions of people face crushing debt due to no fault of their own, whether from unavoidable medical bills or losing their job. Talking to an attorney sooner rather than later can help you settle outstanding obligations for pennies on the dollar.
You can also put an end to aggressive collection efforts and protect retirement funds. Each case is unique, and your lawyer will help you find the best plan to get your financial stability back on track.