Avvo 1-on-1 is a new Avvo question-and-answer article series featuring candid interviews with attorneys in various specific fields of law. The goal of this series is to humanize intimidating law topics for the everyday person through stories, anecdotes, and other real-life experiences shared by attorneys.
Our next installment features an employment attorney, Cara O’Neill.
O’Neill is a legal editor at Nolo, focusing on bankruptcy and small claims. She also maintains a bankruptcy practice at the Law Office of Cara O’Neill and teaches criminal law and legal ethics as an adjunct professor. Cara spent 20 years working as a trial attorney litigating criminal and civil cases. She has been quoted in bankruptcy, finance, small claims, and litigation articles by news outlets that include USA Today, CNBC, U.S. News & World Report, Nerd Wallet, and Yahoo Finance.
Cara received her law degree from the University of the Pacific, McGeorge School of Law, where she graduated as a member of the Order of the Barristers. This highly-selective honor society gives national recognition to top law school graduates demonstrating excellent skills in trial advocacy, oral advocacy, and brief writing.
Have you noticed an increase in consumer credit issues since the beginning of the pandemic?
What we’re seeing doesn’t come as a surprise—especially early in a financial downturn. Creditors who foresee problems ahead are taking actions to mitigate losses by monitoring credit card usage and reducing credit limits in some cases. While seemingly minor, consumers who rely on credit cards to cover emergencies can find themselves without a backup plan.
What advice would you give an everyday citizen dealing with credit and debt issues during the pandemic, and are there resources in place for those in need?
Yes, but assistance isn’t available for everyone or guaranteed. Low-income individuals should apply to traditional assistance programs and funding provided through the CARES Act. But the funds are limited, and some benefits, such as rent assistance, require landlord participation—so hurdles exist. For those who don’t qualify, community food banks can provide relief.
Because millions of people have been affected by COVID-19, creditors know they must also provide help. Those falling behind on a mortgage or utility bills can inquire about assistance or payment programs with their lender or provider. Student loan borrowers should look into options offered by the servicer. Such programs are limited to necessary expenses, however, and many people will likely turn to bankruptcy for help.
Do you anticipate the government stepping in and assisting consumers with credit issues or debt relief?
The federal government established programs to help people with rent, utilities, food, and other necessities, and other programs will be forthcoming. However, it would be unlikely for the government to waive debt related to COVID-19 entirely. Why? Because we already have a system in place for that—bankruptcy. Bankruptcy discharges past-due rent, utility bills, and more after considering a filer’s income, property, and repayment ability.
Has there been an increase in the number of companies filing for bankruptcy?
Official reports don’t show a significant increase in business bankruptcies through June of 2020, which isn’t surprising. No one wants to file for bankruptcy, so people tend to explore every other avenue first. Bankruptcy filings will likely build slowly over the next year or so.
If a business is having financial trouble, what advice would you give them before advising them to file for bankruptcy?
Most businesses impacted by COVID-19 know what they need—customers. Without revenue, companies will struggle, and many will close. The best thing owners can do to protect themselves would be to learn about property and debt in bankruptcy. For instance, bankruptcy won’t erase most tax debts, so paying those bills makes sense. Also, most filers can protect some home equity (but not necessarily all), and all filers can protect ERISA-qualified retirement accounts. So people who’ve paid taxes consistently and avoided dipping into protected funds will have a better chance of emerging from bankruptcy with less debt and a nest egg intact.
What steps can a business owner take to get back on their feet after filing for bankruptcy?
A business owner should learn about post-bankruptcy challenges before filing and prepare by having a secure place to live, a modest but reliable car, and a bank account that isn’t overdrawn. After the bankruptcy ends, the next step would be to start rebuilding credit. It isn’t hard to do. Most filers receive credit card offers soon after the bankruptcy ends.
What are the long-term harms of filing for bankruptcy?
A bankruptcy filing can appear on an individual’s credit report for up to ten years, which can make financing a car or renting a home a challenge. Some banks won’t open a checking or savings account for some period after bankruptcy. But those issues lessen after about two years, and most people can finance a home after four years.