During the course of the pandemic, the federal government took drastic steps to preserve jobs, stop foreclosures, pause student loans and halt certain collection activities. Enhanced unemployment benefits provided by several Covid-related programs established by the CARES Act have expired. Eviction moratorium programs for residential tenants have ended. These much-needed programs provided people with necessary relief in response to the pandemic. But as they have phased out, unpaid residential rental obligations, the inability to forestall foreclosure, as well as looming liability on personally guaranteed defaulted business debt will result in long-forestalled collection activities and lawsuits. In short, creditors have not forgiven debts.

Far from being a way to escape financial obligations, bankruptcy can be seen as an integral part of the financial safety net—like other relief measures- for those who have suffered the most serious and unanticipated financial challenges.  The most common causes of personal bankruptcy traditionally include job loss, medical debt and divorce. As the pandemic subsides, bankruptcy triggers will often be different because of the far-reaching impacts of the pandemic, some of which are still unknown.

Bankruptcy options to be weighed include a straightforward Chapter 7, a Chapter 13 reorganization, a traditional Chapter 11 reorganization, and a Subchapter V Chapter 11 Small Business reorganization. Each client’s unique set of facts and circumstances will determine the best bankruptcy (or potentially non-bankruptcy) strategy.