Many recent news reports about personal bankruptcy focus on the fact that filings are well down this year compared to 2019. In the second quarter of this year, filings were just 60 percent of the average over the previous five years.
The government’s response to the COVID-19 pandemic is largely responsible for this sharp downturn. With courts in Texas and across the country closed for months, creditors could not file for foreclosures and wage garnishments. That likely bought some time for many people struggling with debt. For people who lost their jobs, the extra $600 per week in unemployment benefits, along with other forms of relief provided by Congress, may have also kept their debts from growing out of control.
Of course, this situation is unlike anything we have ever experienced. But even in normal times, far more people are eligible to retake control of their lives using bankruptcy than actually file. This is known as the “missing bankruptcies” effect.
Experts say there are several reasons why people don’t file for bankruptcy or at least delay filing.
People who are unfamiliar with how Chapter 7 bankruptcy works are often afraid that creditors will take their home, their car and their personal belongings. The truth is, the vast majority of people don’t have to give up any of their possessions. Here in Texas, your home is exempt from creditors, as long as the property does not exceed 10 acres in a city or town, or 100 acres in a rural area. If you have a driver’s license, you can keep one vehicle. And families can exempt up to $100,000 worth of personal property from creditors.
Many people are sure that their debt problems will soon go away. They are sure their new business venture will make them rich, or that they are about to get a big raise at work. Generally, optimism is a good thing. But not if it is keeping you from choosing a realistic solution to your problem.
In some cases, it can make sense to wait until a certain date or event happens to file. But you should consult a bankruptcy attorney to make sure that this is the best move for yourself and your family.