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Kevin O'Flaherty

In this article, we discuss the likelihood of an increase in personal bankruptcy filings in Illinois due to the continued economic fallout from Covid-19. Our Illinois bankruptcy attorney will answer the following questions:

  • What is preventing the filing of bankruptcies that should be happening now?
  • What factors might increase the likelihood of bankruptcies in 2021?
  • What bankruptcy options will be available for consumers in 2021?
  • What steps can be taken now to improve my bankruptcy outcome?

Coronavirus cases continue to surge in certain parts of the United States and many are asking questions such as, “Are we in a second wave?” “Is this still the first wave?” “Is the midwest poised for the next big Covid-19 outbreak?” While all of these are valid questions, the bottom line is that cases continue to go up unabated in some states leading to stifled economic reopening plans and hesitant consumers. The stock market churns as certain sectors lose significant amounts of money while others see gains as consumers flock to more remote and socially distancing forms of commerce and entertainment. All this is propped up on a patchwork of stimulus that continues to need reinforcement. 

What Is Preventing The Filing of Bankruptcies That Should Be Happening Now?

As it became clear that the Coronavirus was here to stay and that its impact on the economy was going to be much worse than many could have predicted, the government stepped in and rolled out the CARES Act to stabilize the country. Many lenders for big-ticket items such as home mortgages and car loans also stepped in and allowed their customers to place payment deferrals on their loans. Temporary laws were put in place blocking evictions and foreclosures; many until the new year. All this gave consumers some breathing room to assess their situation and regain confidence that the Coronavirus wasn’t the end of the world. With more economic stimulus on its way in the form of the HEALS act from republicans and the Heroes act from democrats, at least some Americans can look to the future without fear of losing their home or being removed from their residence. But it’s only August and the likelihood of an effective vaccine is still months, if not a year away from reality. What happens when those still struggling to pay the next bill simply can’t anymore? And even worse, what happens when the government stimulus runs out and lenders have no choice but to resume collection?

What Factors Might Increase The Likelihood Of Bankruptcies In 2021?

The three main factors that could influence the likelihood of bankruptcies in 2021 are the potential arrival of an effective vaccine, continued economic stimulus efforts by the government, and the conclusion of large lender’s current deferral programs. Also, the result of the looming presidential election will surely have an impact, whether good or bad, on the economic situation going into 2021. It’s pretty clear that things won’t be getting any better going into the fall and winter months, so even if all four of the above factors have a positive outcome, the longterm economic fallout is likely to be felt in the first half of 2021. As consumers are required to pay their mortgage, rent, property costs related to business, etc, many will have to make the difficult decision of filing bankruptcy.

What Bankruptcy Options Will Be Available For Consumers In 2021?

Illinois bankruptcy law has had a few changes here and there over the years but for the most part, it has remained fairly consistent. The two most common types of bankruptcy utilized by consumers are Chapter 7 and Chapter 13 bankruptcy. 

Chapter 7 bankruptcy is usually the best option for those with a lower income and few non-dischargeable assets. In order to be eligible for Chapter 7 bankruptcy, you must pass the bankruptcy means test. Although those with a higher monthly income won’t qualify for Chapter 7 bankruptcy, if your debt to income ratio is at a certain level, and you are okay with almost all your assets being used to pay down your debt, you may still be eligible for Chapter 7. In Chapter 7 bankruptcy, your assets will be collected and sold to pay off as much debt as possible and any remaining debt is discharged.

Chapter 13 bankruptcy involves paying down your debt through a repayment plan over a 3 to 5 year period. It is utilized for those who don’t pass the bankruptcy means test, have too many assets, or have assets that they wish to keep, but still need some of the benefits from bankruptcy, such as the automatic stay.

What Steps Can Be Taken Now To Improve My Bankruptcy Outcome?

The most important first step when considering bankruptcy is to contact an experienced bankruptcy attorney. He or she can help you better understand your rights under bankruptcy law, what assets can be protected, what bankruptcy option might be best for you and guide you through the overall process. After that, you can create an asset list, and depending on what bankruptcy options you go with, decide on what assets you want to try to protect and what can go towards your debt. Making a realistic repayment plan and credit building plan can also help you bounce back from bankruptcy much quicker. If you have any questions about bankruptcy don’t hesitate to call and speak with one of our qualified attorneys.

Disclaimer: The information provided on this blog is intended for general informational purposes only and should not be construed as legal advice on any subject matter. This information is not intended to create, and receipt or viewing does not constitute an attorney-client relationship. Each individual's legal needs are unique, and these materials may not be applicable to your legal situation. Always seek the advice of a competent attorney with any questions you may have regarding a legal issue. Do not disregard professional legal advice or delay in seeking it because of something you have read on this blog.


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