6 Recent Changes Due to Covid-19 that Affect Bankruptcy
The coronavirus has had devastating effects on our country: illness, death, job loss, financial ruin, and more. To help support businesses and individuals impacted by Covid-19, Congress has passed a $2 trillion economic stimulus package, the Coronavirus Aid, Relief, and Economic Security act (CARES), which has resulted in some changes to the laws affecting consumer bankruptcy:
- Recent stimulus checks are excluded from the definition of “income” The amount of income you have determines whether the Bankruptcy Court will allow you to walk away from your debts or will force you to pay off a portion. So, excluding stimulus money from the disposable income calculation increases your options regarding bankruptcy.
- Chapter 13 plans can now be paid over seven years A debtor already in a Chapter 13 case that was approved before March 27, 2020 may ask the court to extend their payments — substantially lowering the amount they have to pay each month — for up to 84 months. Because the previous limit for payment plans was only five years, debtors can now have more time to successfully pay off their tax or car debt.
- Court meetings are now held by telephone or video To avoid the risk of spreading the Covid-19 virus, the bankruptcy court now holds all meetings between the lawyer, the bankruptcy trustee, and the person filing bankruptcy by telephone or video conference.
- Student Loan Help For covered student loans, payments are suspended and interest is waived for six months. Since many Chapter 13 plans call for student loan payments outside the bankruptcy Plan, this can mean a greater chance of successfully completing required payments within the Plan.
- Mortgage Payment Relief Debtors with federally-backed mortgages can request a forbearance from payments for up to six months if they have been affected by the Covid-19National Health Emergency. Sometimes those mortgage payments are within a Chapter 13 Plan (called “Conduit Plans”) and sometimes they are separate from what is paid to the Court (“Non-Conduit Plans”). In either case, this help means a greater chance of successfully completing the bankruptcy Plan.
- Eviction Relief A landlord may not file for an eviction or charge additional fees for non-payment of rent during a 120-day period beginning on March 27, 2020 if the building is secured by a federally-backed mortgage or a mortgage that participates in certain federally backed housing programs. (Note: this is in addition to eviction moratoriums created by California or local governments.)
If you have questions on bankruptcy or on any of the above mentioned, feel free to give us a call at (415) 351-2265.