Here’s What The CARES Act Means For Bankruptcy Relief
In the year since the COVID-19 pandemic first spread to the United States, Americans have faced an unprecedented medical, financial, and economic challenge. On top of the worsening public health crisis, state-mandated stay-at-home orders and the subsequent rising unemployment rates brought financial insecurity to millions of individuals and businesses. Families that never thought they would face debt have found themselves burning through their savings while struggling to make ends meet; and the threat of foreclosures and evictions has loomed large for many who are trying to scrape together their mortgage or rent payment.
The Coronavirus Aid, Relief, and Economic Security (CARES) Act was first signed into law in March of 2020 to provide emergency support for the American people during the economic hardships of the COVID-19 pandemic. The goal of both the CARES Act and the Consolidated Appropriations Act of 2021 is to deliver fast and direct economic relief to workers, families, and small businesses, with the hope of preserving much-needed jobs in nationwide industries. Congress recently passed a second federal stimulus package in December to bring an additional $600 to individuals, though the amount was considered insufficient by many families and even politicians from both parties.
In addition to the one-time payments Americans received as part of the historic economic stimulus packages, the CARES Act provides short-term relief to consumer debtors under Chapter 7 and Chapter 13 of the U.S. Bankruptcy Code. These temporary modifications are critical for those who are still struggling financially even with increased unemployment benefits and who have filed for bankruptcy or are considering doing so. As of now, these changes are set to expire at the end of March of 2021. Here’s what you need to know about how the CARES Act will impact your potential consumer or small business bankruptcy suit.
Economic Stimulus Checks Are Not Considered Part of Your Monthly Income
When working with your professional bankruptcy lawyer to determine whether you are eligible for Chapter 7 or Chapter 13 Bankruptcy relief, it’s important to know that your economic stimulus checks will not be considered part of your monthly income. If you’re considering Chapter 13, payments made to individuals by the government do not constitute disposable income, which you’ll be required to outline in your debtor’s plan as a way of showing your ability to repay your creditors. In short, the stimulus payment is not intended to have any effect on your ability or your legal right to file for bankruptcy.
You May Be Eligible for a Chapter 13 Payment Extension
If you have suffered a material financial hardship as a direct or indirect result of the COVID-19 pandemic (i.e., loss of job or additional revenue source, expensive medical bills, etc.), you may qualify for an extension on your current repayment plan under the CARES Act. While most payment plans span three to five years, depending on your income, you could potentially be granted a period of seven years by the court. Though the government has been vague about what qualifies as a material financial hardship, your bankruptcy attorney can help you better determine if you might be eligible. If you are, your lawyer can help you request a hearing to modify your confirmed plan.
You Could Have Relief for Your Student Loans
The CARES Act provided some relief on federally owned student loans by requiring the Secretary of Education to defer student loan payments of both principal and interest for six months, without penalty to the borrower. Under the Biden administration, individuals with student loans could find it easier to discharge certain student debts. For now, those with private loans should consider working with their creditor to temporarily defer payments.
Your Small Business Could Find Relief Under Chapter 11 Bankruptcy Protection
Chapter 11 of the U.S. Bankruptcy Code allows a business to stay open and preserve jobs as it reorganizes its affairs, assets, and outstanding debts to pay creditors over a longer period of time. With the economic hardships bearing down on the country, Chapter 11 is an option more and more businesses will turn to for relief. Furthermore, the Small Business Reorganization Act (SBRA) of February 2020 has streamlined the Chapter 11 process for small business debtors, making it more accessible and cost-efficient to reorganize debt than ever before.
In short, Chapter 11 puts an automatic stay on further creditor action such as a lawsuit, foreclosure, repossession, or bank levy. This pause allows managers the time to negotiate with their creditors while maintaining business operations. Managers are given a hearing (most likely over a video call) with the bankruptcy court to seek emergency operational relief, which helps to support existing employees. Another form of aid could come through debtor-in-possession (DIP) financing, which would bring emergency funding on an expedited basis.
If your business files for Chapter 11 during the pandemic, it would be able to stay open during the bankruptcy case, have certain debts discharged, and receive more time to make debtor payments. This could be enough to carry your business through the pandemic, until such time as you can resume business in a post-pandemic world. The CARES Act increased the number of businesses that might qualify for a second chance through Chapter 11.
If Chapter 11 could help your small business stay afloat in these unprecedented times, consult with a bankruptcy attorney to have your current debt obligations and income statements evaluated.
Bankruptcy in the Age of COVID-19 and Beyond
Many individuals and businesses will put off filing for bankruptcy at all costs, even now as the second federal stimulus package amount disappointed many who were hoping for more emergency aid. Instead of viewing a bankruptcy as a failure or a last resort, you should consider it an extension of the financial safety net offered to Americans by Congress in this time of inconceivable economic hardships.
The U.S. Bankruptcy Code exists to serve individuals and businesses by forgiving their debt or allowing them to reorganize it. If Chapter 7, Chapter 11, or Chapter 13 bankruptcy could help you overcome crushing debt and the mental strain that stems from financial insecurity, you shouldn’t hesitate to take advantage of the system’s way of giving relief—that’s why it’s there. The new administration has even expressed interest in making it easier for individuals to file Chapter 7 to liquidate their debt while protecting the equity they’ve built in their car and their home.
If you’re drowning in statements, bills, letters from credit card companies, medical expenses, your mortgage, your car loan, and utility past-due notices, it’s time to re-take control of your finances. Consulting with an expert bankruptcy attorney is the first proactive step toward rebuilding a stable future for yourself and for your family.
Janet Lawson, Bankruptcy Attorney Is Here to Guide You Through the Debt Relief Process
The law office of bankruptcy attorney Janet Lawson is a judgement-free zone where you can discuss your financial situation discreetly. Attorney Janet Lawson has been helping the citizens of Ventura County with their debt relief for over 30 years. After discussing which path makes the most sense for your unique situation, she will provide the support you need as you seek to regain your financial stability.
Her office will file your case within 24 business hours of completion and keep you informed regarding the progress of your case. Attorney Janet Lawson can handle your bankruptcy case no matter what it needs, including as a litigator and an appeals lawyer. She works for a flat fee so that clients are not discouraged from using her expert services to assist in their filing process.
When you’re reading to rid yourself of crippling debt, contact attorney Janet Lawson for your free initial consultation.
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