COVID Bankruptcy Predictions
Written by AskTheLawyers.com™ on behalf of David Shuster with Shuster Law, PLLC.
COVID has resulted in a variety of financial hardships ranging in severity from inconvenient to devastating. With so many people out of work due to shutdowns and layoffs, and hiring becoming increasingly difficult for hurting businesses, many people are relying on credit. While relying on credit during financial hardships is not necessarily a bad thing, for those who are already in debt it is quite possible that they may find themselves bankrupt. If you and your family have experienced significant financial damage as a result of the coronavirus pandemic, reach out to a bankruptcy attorney to discuss your options.
The American Bankruptcy Institute in addition to other industry experts made a variety of predictions at the start of the pandemic.
According to the American Bankruptcy Institute’s report The Coronavirus and Its Likely Impact on the Bankruptcy World: Eight Predictions from Two Restructuring Professionals written by Thomas J. Salerno and G. Neil Elsey, “With events being canceled nationwide and corporations and consumers canceling nonessential travel, the impact on hotels, air travel, ground transportation, and restaurants and other service providers that serve business travelers is becoming severe.”
The report goes on to discuss eight significant predictions, including the following:
- A new wave of business restructuring will sweep through most industries.
- Tightened credit will likely result in recessions.
- Businesses are likely to begin invoking a legal clause referred to as force majeure to argue that they are not really in “default” as they defend against debt collectors.
- Bankruptcy court will likely be more understanding than usual with people facing debt.
- Matters of bankruptcy court will be handled mostly over the phone, email, or video conference.
- Some wealthy investors will take the opportunity to acquire struggling companies and other assets (i.e. “vulture investors”).
- Asset values will be depressed, or reduced, reducing the impact of asset sales in bankruptcy cases and giving vulture investors a significant opportunity.
- Multi-disciplinary “task forces” are likely to be formed among law firms, financial advisors, accounting firms, and other restructuring professionals in order to offer fast, efficient help to the flood of clients likely in need of financial assistance.
Bankruptcy attorneys know how to help, and they recommend reaching out sooner rather than later.
Experts say it is never too soon to look for help. Reach out to a bankruptcy attorney or financial advisor to discuss your situation and possible methods of recovery from the economic effects of COVID-19 the moment you suspect you are in serious financial trouble.
In the best-case scenario, the bankruptcy attorney will be able to assure you that you are in better shape than you think, and provide advice and resources to help you through these hard times. Worst case scenario, the bankruptcy attorney will help you evaluate your current situation as well as laying out a series of potential options for you, including the possibility of filing for bankruptcy. Chapter 7 or “fresh start” bankruptcy allows individuals and sole proprietors to effectively erase their debt without expectation of repayment.
To learn more about the various types of bankruptcy, or for help evaluating your current financial situation, reach out to a bankruptcy attorney sooner rather than later.