Will the Stimulus Package Affect Your Ability to File for Bankruptcy?

For many people and businesses, bankruptcy is a viable solution for overcoming insurmountable debt. By filing, some of your most pressing debts can be dismissed, providing personal relief and a chance at a fresh start.

Many people are now wondering, will stimulus packages issued during the coronavirus pandemic affect if and how we file for bankruptcy?

The Bankruptcy Attorneys at H. Lehman Franklin, P.C., want to walk you through filing for bankruptcy during the times of COVID-19.

Schedule a Free Consultation Today

Changes to the Bankruptcy Code During the COVID-19 Outbreak

In late March of 2020, President Trump signed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). This act provides relief to consumer debtors and businesses who may be struggling during these trying times.

In addition to financial relief, the CARES Act makes necessary changes to the U.S. Bankruptcy Code. If you’ve recently filed or are considering filing soon, these changes may affect you, but in many ways, positively.

Consumer Debtors: Filing for Bankruptcy After Your Stimulus Package

  • Chapter 13 Bankruptcy: you can pay off debt gradually over time as long as you have a steady income and meet other eligibility requirements. This type of bankruptcy can help people catch up on mortgage payments, car payments, and other debts.
  • Chapter 7 Bankruptcy: you can file if you’re unable to pay back your debts, so long as you meet eligibility requirements. Liquidation of assets does not usually occur with this chapter, but it can in some cases.

Chapters 7 and 13 are affected by the CARES Act, in that the definition of “income” has been temporarily altered to accommodate new strain on debtors. The stimulus check, as a federal relief payment, is excluded from this definition of income so that you can keep it when you file.

Stimulus checks are also excluded from your disposable income in the Chapter 13 plan.  Additionally, unemployment benefits under the CARES Act are excluded as “income” in Chapter 7 and Chapter 13 cases.

Do You Currently Have a Chapter 13 Case Pending?

If your pending Chapter 13 case was already confirmed, meaning approved, by the Bankruptcy Court prior to the enactment of the CARES Act, your plan may  be modified thanks to the CARES Act.

Payments now can be extended up to two additional years for a total of  seven years, as opposed to the five-year term currently allowed.  However, you must demonstrate that you have been impacted in some way by COVID-19, such as being laid off from your job or having hours reduced. This provision of the CARES Act is in effect for one year.

Provisions for Small Businesses

The CARES Act also works with the Small Business Reorganization Act (SBRA) to accommodate small businesses in a Chapter 11 case. With new CARES Act provisions, debt limitations have increased to $7.5 million, meaning many more businesses qualify as a “small business.”

This qualification allows them to file for Chapter 11 bankruptcy as such under the SBRA, which has many favorable elements that make it easier for a small business to succeed in Chapter 11 cases, which often can be difficult.  The increased debt limitation allowed under the CARES Act is in effect for one year

Do You Need Help Filing for Bankruptcy?

Even with these new provisions, bankruptcy can still be tricky to navigate. In order to file successfully, you’ll need experienced legal guidance.

We are a debt relief agency. We help people file for bankruptcy relief under the bankruptcy code. We provide federal debt restructuring help.

If the time has come to leave insurmountable debt behind, consider filing for bankruptcy with the team of H. Lehman Franklin, Jr., and Kimberly S. Ward.

Schedule a Free Bankruptcy Consultation Today

The first step in filing for bankruptcy at H. Lehman Franklin, P.C., is to schedule your free consultation. Our bankruptcy lawyers will assess your case and determine if we’re able to take it on at this time. If we can fight for you, we will. We’ll start plotting a course of action right away.

Schedule your free bankruptcy consultation today!