Will The Sequester Lead To More Bankruptcy Filings?

Here is a legal problem unique to the DC area, and in particular to Waldorf & Lexington Park.  Now that the Sequester has hit, many of our friends and neighbors are getting furloughed.  Some may be laid off.  This is NOT going to be good for the local economy. What will happen to bankruptcy filings?

If the furloughs continue, or the government gets shut down this year as a result of budget wars, will there be a tidal wave of bankruptcy filings?  Many of our neighbors who work for the Federal Government are living right on the edge ever since the housing bubble burst and the economy collapsed in 2008.  It wouldn’t take much to push them right over the edge into bankruptcy.

Imagine you are living paycheck to paycheck and suddenly they stop.  What can you do?  You will probably think hard about filing for that bankruptcy you have been trying to put off.  That may be your only answer.  If paychecks suddenly stop for thousands of Waldorf residents who work for the Federal Government, this may be their only answer, and it may result in a huge flood of bankruptcy filings.

Also consider the people who already filed for bankruptcy, and are making plan payments under a chapter13 plan.  When you file Chapter 13 bankruptcy, the Court and Trustee take some of your income to pay back your creditors.  What if your formerly stable income just dries up?  There will be no money to pay off your plan, and you will be out of compliance.  What will the Bankruptcy Judge’s do if that happens to thousands of DC area residents at one time?

The answers to these questions remain to be seen, but they do raise very troubling issues for our policy makers.  If the Sequester continues, or the government shuts down, the effects will be dramatic in Waldorf, Lexington Park, and other parts of Southern Maryland.  We may see a new tidal wave of bankruptcy filings, which will have long-term devastating consequences to the local economy.

If you are a federal employee and want to find out what you can do to protect your home and your family if you lose your income, please see our resource guide on how to save your home in a financial crisis, and also learn about your options under bankruptcy rules by reading this resource guide on bankruptcy.  You can contact us anytime for a free consultation.

About Southern Maryland Law


Andrews, Bongar, Gormley & Clagett is one of the oldest and largest law firms in Southern Maryland. We have been serving clients here for over 50 years. We have more attorneys and a larger staff than most other local law firms, so we can handle a wider variety of legal matters. Each attorney concentrates his or her practice in a few key areas, so you can be assured of the expertise you need.


But we are not so big that we forget about personal service! Your legal matter is unique, and requires a personalized approach. We will always remember that. If you have a legal issue, contact us today to schedule your consultation.