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COVID-19: Timing Your Bankruptcy – How the Coronavirus is affecting the United States Bankruptcy process and what to do NEXT.

This post is for People in Bankruptcy and People Thinking about Filing Bankruptcy because of the Impact from the Coronavirus

This post gives you an overview of how the bankruptcy process is working related to the COVID-19 pandemic. It covers questions for open cases and filing new cases. It looks at how bankruptcy can help you eliminate debt for yourself and/or your business and its timing related to the Covid-19 pandemic.  Laws, rules, and procedures are changing on a daily if not hourly basis.  If you have questions, call an attorney to talk to them for free.  My firm is giving virtual consultations by video or the phone related to bankruptcy, foreclosure, and evictions for free at this time.

If you have property secured by debt, we will discuss payment plans for your creditors and in some circumstances paying less than is owed on the property.  This post is available in book format below.  DOwnload the covid 19 bankruptcy book for free

What is bankruptcy and who is it for?

Bankruptcy is the process where individuals and businesses can eliminate or restructure most or all of their debts. The goal of bankruptcy is to help individuals get a fresh financial start and recover from debts that they most likely will not be able to pay back.

If you are considering filing bankruptcy or already have filed bankruptcy, you are not alone. Almost 800,000 bankruptcies a year are filed.  With the covid-19 and the jobless rate expected to top 30% a lot of people are going to need a finical restart.

What are the benefits of bankruptcy?

Automatic Stay – When you file bankruptcy, you are protected from your creditors. They are legally prevented from pursuing you for debt collections.

Stop a foreclosure Sale – The automatic stay will stop most legal actions including a foreclosure sale.

Get back a reposed Vehicle – If your car or property has been reposed, the automatic stay will let you recover it to either get current on payments or at least keep it until the automatic stay is terminated

Stop an Eviction – You could even stop an eviction at least temporarily if it is related to non-payment of rent. In a chapter 13 you could actually get caught up on your rent to keep your home.

Eliminate Debt – With Chapter 7, you can eliminate all eligible debt. While there are some types of debt that are not eligible for elimination, you can get rid of most or all debts. Chapter 13 and 11 may allow you pay less than you owe through a repayment plan.

Keep Your Assets – Many times you can keep your home, vehicles, and other property. Even business can keep their assets normally.

Restructure Debts – With a Chapter 13, you can make manageable debt payments for 3-5 years. This lowers your debt burden dramatically. Under the CARES act this can be expanded to 7 years for the next year.

Fresh Start Financially – You no longer York just to pay back creditors.  You have extra money in your pocket again.

Questions related to Covid-19 impact on future Bankruptcy filings.

The bankruptcy courts have been impacted just like almost every other system in the US because of the Covid-19 pandemic.

Are the bankruptcy courts still open?

Yes. However, most court hearings will be done over the phone or video. The courts are not holding in person meetings.  This includes 341 meetings of creditors.

Can I still file for bankruptcy because of the Coronavirus social distancing?

Yes. The courts are allowing all chapters of bankruptcy cases to be filed including motions. If you are filing pro se check the courts website to for the procedure that they are using.

In the case of a chapter 13 and chapter 11, you will need to be able to make your mortgage and trustee payments unless you seek to have your plan modified because of changed circumstances.

If a motion has been filed in your bankruptcy case, you are still expected to respond to the motion. Motions will be decided on the papers if you do not request an oral argument. The argument would be made by the phone or video depending on the judge.

Suspension of Mortgage Plans for homeowners effected by COvid-19 for FHA, HUD, USDA, VA, Freddie Mac & Fannie Mae loans.

Borrowers with a financial hardship that makes them unable to pay their mortgage-related to the COVID-19 pandemic requires mortgage servicers to offer a forbearance – for up to six months with a possible extension for an additional six months of forbearance if requested by the borrower.

I am unemployed because of COVID-19, can I apply for bankruptcy?

Yes.  If you are unemployed you can file for bankruptcy in most cases.  For a chapter 7 bankruptcy, the trustee will look at how much money your household made for the last 6 months or if more than 50% of your debt is business related.

We have filed bankruptcy in the past for business owners that were being sued to get rid of business debt even though they normally wouldn’t have qualified under the chapter 7 means test.  We have also filed for professionals with over $100,000 in student loans that helped them qualify for a chapter 7 bankruptcy as the student loans were not considered consumer debt.

If I got money under the Cares act, is it considered income?

Coronavirus related payments received by individuals and families from the federal government, as a result of the CARES Act and other stimulus, will not be included in the definition of “income” for eligibility purposes for a chapter 7. These payments will also not be considered as part of “disposable income” for plan confirmation purposes.

SO, this means the payments you may receive under the bankruptcy will not hurt you if you apply for bankruptcy.

Qualifying for a chapter 7 bankruptcy during Covid-19 Pandemic

The look back period for filing a chapter 7 bankruptcy is 6 months unless more than 50% of your debt is non-consumer based. If you are unemployed, it may be easier to qualify for bankruptcy.

Qualifying for a chapter 13 bankruptcy during Covid-19 Pandemic

A chapter 13 bankruptcy plan requires that the debtor has income.  If you are unemployed, you may not qualify for a chapter 13.  You may want to look into filing a chapter 7 first to get rid of your unsecured debt. This would give you at least 3 months to secure income if you need to file a chapter 13 bankruptcy.

When is the right time to declare bankruptcy in light of the Coronavirus Pandemic?

If you are considering whether to file bankruptcy, the right time is based entirely under your unique situation.  In this book, we will walk you through several questions you need to ask yourself related to your type of debts, amount of the debts, income or lack of income, assets and future outlook.

So, the short answer is that the timing depends.  Discuss this with an attorney who understands your situation.  Most attorneys give free consultations related to bankruptcy.

Here is a list of items needed to file bankruptcy and questions that can impact the timing of your filing for bankruptcy. Just because you answer yes to any of the questions does not mean that you are automatically excluded from applying, but it is most likely something that will have to be disclosed to the bankruptcy trustee. Answering the questions falsely on the bankruptcy petition would be considered bankruptcy fraud and could get a debtor in trouble.

Did the $2.2 trillion Cares Act affect bankruptcy filings?

In response to the COVID-19 pandemic, the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) was signed into law to provide a $2.2 trillion economic stimulus package. The goal of the act is to provide economic support to United States families, individuals, and business impacted by COVID-19. At this point that is just about every person in the United States.

The CARES Act also modified to main aspects of the U.S. Bankruptcy Code to help businesses and individuals. These modifications effect currently filed bankruptcies and bankruptcies that will be filed in the future.

Federal Student Loans and interest is suspended because of the CARES act

The cares aft has suspended payments and interest accrual until 9/30/2020. This only applies only to loans held by the Department of Education. This does not apply to Private student loans, Privately held Federal Family Education Loans (FFEL)and  Perkins Loans.

CARES ACT – Amendments on Income for Bankruptcy

The CARES act excludes Covid-19 stimulus payments as income for the chapter 7 means test and it is also not counted as disposable income for a chapter 13 bankruptcy.

The stimulus payments can still can be considered property of the estate, so you need to see if you need to exempt it if you file for bankruptcy.

Mortgages in the Wake of CARES act

CARES Act Relief from Foreclosure: CARES Act § 4022 provides foreclosure relief for “federally-backed loans,” which means loans (for 1–4 family properties) purchased, securitized, owned, insured, or guaranteed by Fannie Mae or Freddie Mac, or owned, insured, or guaranteed by FHA, VA, or USDA. See § 4022(a)(2). • The majority of loans are federally-backed.

To determine if your mortgage is federally backed loan…

  1. As the borrower you can contact the servicer. Call them. Many backs are offering 90-day forbearance.
  2. Fannie Mae Loan Lookup: https://www.knowyouroptions.com/loanlookup#
  3. Freddie Mac Loan Lookup: https://ww3.freddiemac.com/loanlookup/ •
  4. For an FHA loan call HUD’s National Servicing Center at (877) 622-8525

You may have to check all of the 4 above sources to determine if your loan is federally backed.

Foreclosures are at a 60 stay stand still for Federally backed loans.

A servicer of a federally backed mortgage loan may not initiate any judicial or nonjudicial foreclosure process, move for a foreclosure judgment, order a sale, or execute a foreclosure-related eviction or foreclosure sale. The provision lasts for not less than the sixty-day period beginning on March 18, 2020. This provision is not limited to borrowers with a COVID-19 related hardship.

I have a multi-family home, how is my mortgage effected and can I be foreclosed?

Multifamily homes are defined as having 5 or more units. As a borrower you can ask for a forbearance on your mortgage payments as long as you were current on your payments as of February 1, 2020. And that you affirm that you are experiencing financial hardship. The request can be written or oral.  However, we recommend making a written application and verify it was received by your bank.

The initial forbearance will be for 30 days, which can be extended for up to two additional 30-day periods. The extension requests need to be made 15 days prior to the expiration of each 30-day forbearance period.

Using this program, you as the borrower have the right to end the forbearance at any time.

During the period of forbearance, the borrower may not:

  1. Evict or initiate the eviction of a tenant solely for nonpayment of rent or other fees or charges; or
  2. Charge any late fees, penalties or other charges to a tenant for late payment of rent; or
  3. Issue a notice to vacate.

Considering there is a moratorium on eviction filings  for non-payment of rent there is not that much of an issue in the rights that are given -up, however if the forbearance is not deferred to the end of the mortgage, the payments are technically due when the forbearance expires.

Can I evict my tenant for non-payment of rent?

Most likely not at this time. You will need to see if you have a federally backed mortgage. A Temporary Moratorium on Eviction Filings has been implemented under Section 4024 of the CARES act. This applies for 120-day after the CARES Act was enacted. Landlords are prohibited from:

  1. Initiating legal action to recover possession of a tenant’s unit for the nonpayment of rent,
  2. Charging fees, penalties or other charges to the tenant related to such nonpayment of rent, or;
  3. Issuing a notice to vacate.

The foregoing restriction applies to any property where the landlord’s mortgage on that property is insured, guaranteed, supplemented, protected or assisted in any way by Fannie Mae, Freddie Mac, HUD, the rural housing voucher program or the Violence Against Women Act of 1994.

Small Business Reorganization Act (SBRA) of 2019 – Small Business Chapter 11

Under the new Subchapter V of Chapter 11 of the Bankruptcy Code debtors are allowed to file for bankruptcy with debt up to $2,725,625. The cares act increased this debt to $7,500,000. So, many more businesses and individuals now qualify for the streamlined version of a chapter 11 bankruptcy.

The CARES Act amended the SBRA, which became effective February 19, 2020. This modification is set to sunset in one year. Which means unless congress modifies this law, these changes are only temporary. If you are a business or an individual with over $2,725,625 in debt, filing for bankruptcy would be cheaper and easier that after February 19, 2021. So, the time to file would be within the next year for bankruptcy.  The exact time would be a discussion to have with an attorney based on your cash flow and assets.

The streamed lined subchapter 5 is much more affordable to than a full chapter 11 and includes less oversite and is easier to be administered.  The debtor still retains all of its possessions, but has less hurdles to get to a successful plan than the way a chapter 11 for over $7.5 million is handled.

As a reminder this is temporary. The eligibility threshold reverts back to $2,725,625 in a year.

Debtors which includes both businesses or individuals with at least 50% of their debts being non-consumer debt and not exceeding $7.5 million are eligible to file under the SBRA.  There is no debt limit on chapter 7 bankruptcies, and chapter 13 are only for individuals and the debt limit is capped for both secured and unsecured debt.

What are the Benefits of a SBRA subchapter V Chapter 11 bankruptcy?

In an SBRA case, the bankruptcy process is quicker than a traditional chapter 11.  The deadline for filing a subchapter V plan is just 90 days instead of the 120 days in a traditional Chapter 11 case.

A subchapter V plan may be confirmed even if all impaired classes of creditors vote to reject the plan. An impaired class of creditors are a group of creditors who will be paid less than they are owed. Which is why a business goes through with a chapter 11 plan. In a regular Chapter 11 case, a Court cannot confirm the plan unless at least one impaired class of unsecured claims votes to accept the plan.

Subchapter V debtors are not obligated to pay quarterly U.S. Trustee’s fees, which in a traditional Chapter 11 case can be significant. See below for chapter 11 fees.

CHAPTER 11 FEE SCHEDULE FOR CALENDAR QUARTERS BEGINNING
JANUARY 1, 2018 THROUGH SEPTEMBER 30, 2020

TOTAL QUARTERLY DISBURSEMENTSQUARTERLY FEE
$0 to $14,999.99$325.00
$15,000 to $74,999.99$650.00
$75,000 to $149,999.99$975.00
$150,000 to $224,999.99$1,625.00
$225,000 to $299,999.99$1,950.00
$300,000 to $999,999.99$4,875.00
$1,000,000 or more1% of quarterly disbursements or $250,000, whichever is less

Source: https://www.justice.gov/ust/chapter-11-quarterly-fees

Unlike a traditional Chapter 11 debtor, a small business debtor may stretch payment of administrative expense claims out over the term of the plan.

In an SBRA case, a creditors’ committees will generally not be appointed. It is possible that a creditor could move for a committee to be appointed, however the purpose of the BRA is to make it easier for debtor to complete a chapter 11 plan and make sure creditors are also paid. The lack of a creditor’s committee will help minimize the chances of disputes a subchapter V debtor might face in a Chapter 11 case if a creditor wanted to aggressively go after a debtor for a better deal.

In an SBRA case, only the debtor is permitted to file a plan of reorganization. This is not the case in a traditional chapter 11 plan where creditors may also file competing plans that need to be weighed.

A standing trustee will be appointed in every SBRA case and their roll is fairly limited compared to a traditional chapter 11. Unlike a trustee that is appointed in a traditional chapter 11 case, the SBRA trustee is not concerned with the daily operation with the Subchapter V debtor’s business.  The trustee’s main goals are to help the debtor develop a feasible plan and resolve issues with creditors. The goal is speed and resolution not collecting trustee fees.

In an SBRA case, a disclosure statement is not required, unless the Court orders otherwise.

An equity holder may be able to keep their equity interests in the business without the need to contribute new value because there is no “absolute priority rule” under Subchapter V.  This means that business owners can keep their interests in the company even if unsecured creditors will not be paid in full under the plan as long as the contribution to the plan meets the threshold requirements based on the business’s profitability.

The Don’ts of filing Bankruptcy

Don’t Rush Into Bankruptcy without evaluating your entire situation. Bankruptcy works well to wipe out debt. However, you’re limited in how often you can do so. You can receive a Chapter 7 discharge once every 8 years however discharge under a chapter 13 is less time. If you are not likely to see a financial improvement in the next 60 days, it may make sense to time the filing with when you are about to see an improvement in your situation and you have stopped going in debt.

Don’t Wait Too Long to file bankruptcy. If you are facing a foreclosure sale, y  ou are facing an eviction, have a wage garnishment, a possible repossession is in your future, or your car has been repossessed, it may be in your best interest to file for bankruptcy quickly.

Don’t Drain Your Retirement Account to pay bills. You can protect most of your hard-earned retirement funds in bankruptcy. Many people make the mistake of whipping out their retirement funds to pay bills and debts that they could have avoided with bankruptcy. People can always file bankruptcy, and then tap their retirement if they have no other options.

Don’t File When You are About to Receive a lot of Money or Assets. Once you receive the money, it would become part of the bankruptcy estate. Trustees ask if you are about to receive an inheritance or a law suit settlement at the 341 meeting of creditors hearings. They get paid a portion of the fees recovered in a chapter 7 bankruptcy to pay other creditors. 25% of the first $5,000, 10% up to $50,000, 5% to a $1 million and 3% of everything over $1 million.

Don’t Selectively Repay Creditors. Sure, you may want to repay your Mom before filing bankruptcy, but If you pay back loans to friends or relatives within one year of filing it can be considered a “Fraudulent Transfer” The same goes for creditors that are repaid within 90 days of filing. This may be considered a “Preferential Transfer.” Fraudulent and Preferential Transfers can be reversed in a chapter 7 bankruptcy by the bankruptcy Trustee.

Don’t Provide Inaccurate, Incomplete or Dishonest Information to the Bankruptcy Trustee or on your filing. Your providing information to the court, the trustee and your creditors under the penalty of perjury.  If you do not provide complete and accurate information about all of your income, assets, debt, business dealings, expenses and financial history you can get in trouble or have your case dismissed. If you knowingly misrepresent your information, such as by failing to disclose a home you own, you could be subject to criminal penalties, including fines of up to $250,000, twenty years in prison, or both. And if the asset is discovered by a chapter 7 trustee, they may sell it out from under you.

We have had clients forget to include assets on their petitions in the past, and we were allowed to amend the petitions so mistakes can be correct if they are honest mistakes.

Don’t Forget to File Taxes.  You may not have the money to pay your taxes, but it is a requirement of the bankruptcy courts to be current on your filings. Income taxes greater than 3 years old can be forgiven, however taxes needed to have been filed or the IRS needs to have known that they were due and an offer of compromise has not been excepted in the last 240 days.  If you have tax issues, talk to an attorney.

Don’t Rack Up New Debt that You Have No Intention of Paying. Any debt incurred in the 70 to 90 days before filing bankruptcy may cause you trouble. However, things like necessities like food, clothing, and utilities generally do not apply.

Don’t Hide or Move Assets. People might be tempted to sell, transfer for safekeeping, or hide assets before filing bankruptcy. This is inviting trouble. The FBI investigates bankruptcy crimes. Most bankruptcy lawyers can usually help in these situations, as they see these issues all the time where people make mistakes and it becomes the attorney’s job to unwind the mistake.  If you’re not sure about some transfer or other issue, talk to a bankruptcy attorney first. Free advice now, is better than paying later.  Attorneys are also bound by attorney client privilege, so your privacy is protected.

Items Needed to file bankruptcy.

  1. Do you have 6 Months of paystubs (6 months prior to this month you file for bankruptcy for you and your spouse if you and your spouse live in the same home.)
  2. Prior two years of filed taxes 2018 and 2019 unless you have no filed 2019 then 2018 and 2017.
  3. If you own a home a current mortgage statement.
  4. List of Assets. Anything of value. List the values as if you were to sell it at a garage sale. A form is attached at the end of this book as an example.
  5. List of monthly expense. A form is attached at the end of this book as an example.

Questions to be answered when filing for bankruptcy

  1. How long have you worked at your current job? Years           Months; Job Title
  2. How long have has your spouse worked at current job? Years       Months; Job Title NA
  3. Last 2 years of Gross Income from operation of business –List each business separately NA
  4. Payments to creditors > $600 in the last 90 days (Total of all payments is greater than $600. ie $201 for 3 months)

Name       Date       Amount Paid       Amount Still Owed

  1. Payments to INSIDE creditors > $600 in the last year

Name         Date       Amount Paid       Amount Still Owed

Family members are considered “insider creditors,” which the Bankruptcy Code defines as relatives, general partners, partnerships in which the debtor is a general partner, director, officer, person in control, affiliate, and insiders of affiliates of the debtor.

  1. List all suits and administrative proceedings to which the debtor is or was a party within one year immediately preceding the filing of this bankruptcy case.

Caption         Nature        Court          Status

  1. List any property foreclosed, given to a creditor as a deed in lieu of foreclosure, list any garnished levied or property seized in the last year? NA
  2. Any property given to creditors in the last 6 months? NA
  3. List all property which has been in the hands of a custodian, receiver, or court-appointed official within one year immediately preceding the commencement of this case. NA
  4. List all gifts made in the last year > $600. NA (Includes charities and family members)
  5. List any losses form fire, theft or gambling the last year. NA
  6. Have you paid anyone for debt counseling or bankruptcy in the last year?
  7. List all financial accounts and instruments held in the name of the debtor or for the benefit of the debtor which were closed, sold, or otherwise transferred within one year immediately preceding the commencement of this case. (Bank accounts, stock broker or other accounts in your name) Name NA  Date of Closing
  8. Do you have a safe deposit box or a storage unit?   Location       Contents
  9. Have you had anything setoff in the last 90 days or are you likely to have a set-off? Yes or No  (An example would be if you have a credit card from Chase and a Checking or Savings account from Chase and they take the money from your savings account  to pay the Credit card)   Name NA   Amount
  10. Do you hold property for someone else? (Example would be you acting as a trustee.)
  11. Where have you lived in the last 3 years 3 years?  Address      –   Dates
  12. Have you been divorced in a community property state in the last 8 years? List of States – Nine states (and Puerto Rico) have community property laws that determine how debt and property are divided in a divorce. These states include Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin.
  13. Are you likely to be libel for any environmental law violation?
  14. Have you operated a business or been the owner of one in the last 6 years?

Name       EIN or ITIN or last 4 of SS       Address

Nature of Business       Beginning and ending dates

  1. List all other property, other than property transferred in the ordinary course of the business or financial affairs of the debtor, transferred either absolutely or as security within two years immediately preceding the commencement of

this case.  Name       Date       Item

Name of all bookkeepers you have used in the past 2 years:

  1. Name of anyone who did inventory of your business in the last 2 years Date

24 Are you a current or former Partners Officer or Shareholders of a business?

  1. Do you have any bank accounts?

Institution        Type    Joint?    Name(s) on Account        Account Number        Balance

  1. Do you have any retirement accounts?

Institution        Type      Name(s) on Account        Account Number        Balance

  1. Do you own any other real estate property other than your mailing address?

Address       Mortgage/HELOC?

  1. Do you have any other sources of income?

Will you need to have a statement prepared to explain any of the below?

Social Security? Monthly Income

Disability? Monthly Income

Pension? Monthly Income

Child Support? Monthly Income

Alimony? Monthly Income

Family Contributions? Monthly Income       From

Will you need a contributor to help pay a chapter 13 or 11 plan?

 

What does it cost to file a chapter 7 bankruptcy?

We offer people a flat fee or a payment plan.  When asking how much an attorney charges make sure to ask if there are additional fees. For instance, the court filing fee is $335. If you own a property, there is usually an inspection that will need to be performed by a real estate broker to value the property so the trustee knows what it is worth.

We even offer people $0 down payment plans if a debtor is on unemployment or makes more than $2000 a month to make it that much easier to afford filing for bankruptcy. If the debtor needs a guarantor the debtor’s guarantor needs to make $3000 a month.

 What does it cost to file a chapter 13 bankruptcy?

When file a chapter 13 bankruptcy, we require a down payment and then put the rest of our fee in the chapter 13 plan. The amount down is normally $1,500 to $2,500 based on how much work is required.  If someone is on their 2nd or 3rd bankruptcy filing where we have to make motions to reinstate the automatic stay we have to charge more.

What does it cost to file a chapter11 subchapter 5 bankruptcy?

We charge a $10,000 to $15,000 retainer for a subchapter 5 bankruptcy.  The retainer is based on the amount of debt and complexity of the case.  We then bill hourly against the retainer, and if fees go beyond the retainer, we then put the rest of our fees in the plan.

What does it cost to file a traditional chapter11 bankruptcy?

We charge a $25,000 retainer for a traditional chapter 11 bankruptcy.  W normally would like at least 30 days prior to filing a chapter 11 to make sure all of the first day motions are correct.

I have an open bankruptcy case, what can I do?

I can’t make my mortgage payments because my tenants are not paying rent?

It can be especially difficult to make mortgage and trustee payments when your tenants are not paying rent, and the courts are closed so that you cannot evict them.  In these situations, you should consult with an attorney to go over all of your options related to possible emergency funding from the state and federal government.

You may also want your tenants to apply for emergency funding.  Prior to the coronavirus pandemic there were programs to help tenants who were facing eviction for non-payment of rent.

You also need to understand the moratorium on the eviction process related to both state and federal laws, and the fact most courts are not open.

Is my 341 hearing being postponed?

All pending 341(a) meetings of creditors (initially scheduled for March 25, 2020 through April 10, 2020) have been postponed to a later date

In a Chapter 13 case, the postponement of the 341 creditor meetings does not relieve debtors of their obligation to keep making plan payments to the Trustee not later than 30 days after the date the petition was filed. As an example if you file March 1, the first payment is due April 1 with the second payment due May 1st.  If you filed March 30th, the first payment is due in 30 days and the second payment is due May 1. So at times if as a debtor you are running short on cash for a chapter 13 meeting, waiting a few days can make it easier to make payments. Debtors may make these payments electronically in most cases, so check your trustee’s website.

If you cannot make your payments you may be able to get them deferred for 3 months or modify your plan to up to 7 years.  This provision was in the CARES act and is set to set one year after the law was passed, so you have a year to modify your plan to 7 years from the date the CARES act became law.

How do I call into my 341 hearing?

Most trustees are doing 341 creditor meeting by Video and Telephone. If the Trustee does conduct a video or telephone meeting specific instructions will be sent to you about the postponement of the meeting.

If my 341 hearing is postponed, will my automatic stay be affected?

Not unless your bankruptcy case has been dismissed, or one of your creditors has the automatic stay lifted. Otherwise, the automatic stay will remain in effect unless certain exceptions are met, such as your creditor requests relief from stay. Debtors who file multiple bankruptcy cases in a short amount of time may be denied an automatic stay as well.

Should I contact creditors if my 341 hearing is postponed?

No. The court will provide notice to creditors in accordance with the law, so you don’t need to contact your creditors.,

What to do if you cannot make your Chapter 13 payments because of Covid-19?

You can ask to have your payments deferred for 3 months and then pay more toward the rear of the plan. ring payments for 3 months.  I

In some case, you may be able to ask the court for a Hardship Discharge. The court will analyze your financial situation compared to the best interest of your creditors before granting a hardship discharge.

Most debtors do not get any debt wiped out through a hardship discharge. The court does not sell any of your property when you ask for a hardship discharge, so the discharge does not have the same effect as a chapter 7 discharge that wipes out debt. You may still owe your credit card and medical bills and other debts unless the creditors have received as much as they would have if the debtor had filed a Chapter 7 case under the chapter 13 payment plan

Modifying Current Chapter 13 Plans from 5 to 7 years

The CARES act allows people for the next year to be able to modify their plans from 3- or 5-year plans to up to a 7-year plan. You may also be able to reduce your payment plans due to changed circumstances. This only applies to plans that had already been confirmed prior to the pandemic.

It may also be possible for the trustee or a creditor to move for modification of a plan.

In the short term you may be able to suspend up to 3 payments if you can establish a loss of income or documented hardship. The Trustee drafts a stipulation if the trustee agrees to the hardship. Payments would increase moving forward to make up for the missed payments.

You may request the deferment of 3 months, and then move for the 7-year plan option if circumstances have not improved in the 3 months.

Dismiss Your Case And Refile

If none of the options above allow you to meet your goals, you can always let the court dismiss your case and refile another Chapter 13 bankruptcy. However, be very careful if you do this.  You may have to apply to the court to have the automatic stay reapplied to your case.  Or your creditors could move that you are filing in bad faith.  This might be your only option, however, discuss your options with an attorney before doing this.

Contact the Law Offices of Patel, Soltis, & Cardenas for Assistance – 973-200-1111

The Bankruptcy Court continues to follow CDC guidelines, and public health officials’ advice. Information is being updated daily.

Please contact the Law Offices Patel, Soltis & Cardenas at 973-200-111 for assistance with your bankruptcy case, coronavirus-related changes, and any questions you have or email us at Info@focusedlaw.com.

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