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Learn How the CARES Act has Temporarily Changed the Bankruptcy Code

Amidst the COVID-19 pandemic, there have been some temporary changes to certain bankruptcy rules under the Federal Coronavirus Aid, Relief, and Economic Security (CARES) Act. The CARES Act aims to provide emergency assistance and health care for individuals, families, and businesses that are being affected by the 2020 COVID-19 pandemic. The CARES Act also modified certain provisions of the Bankruptcy Code which will last for one year, expiring on March 27th, 2021.

CARES Act changes to Chapter 7 and Chapter 13

Under the CARES Act, the government has been providing stimulus checks and other payments that are meant to provide some financial assistance during the crisis. These payments will not count as monthly income for debtors that are considering filing under Chapter 7. They also will not count as disposable income for those seeking to file under Chapter 13. In other words, stimulus checks will not affect your eligibility to file under either chapter or any required payments to unsecured creditors in a Chapter 13 Bankruptcy. 

This Act also allows Chapter 13 debtors the chance to extend the length of the Bankruptcy Plan from five to seven years. In many cases, this would result in a longer plan term but lesser overall monthly payments.  If you have a Chapter 13 plan that has already been confirmed, you can modify the plan to increase the term of the plan and lower the monthly payment.  If you have not yet filed a case and you do so before March 27, 2021, a plan can be proposed with a maximum plan term of 7 years rather than the normal maximum plan term of 5 years. All changes under the CARES Act are applicable until March 27, 2021

Other notable recent changes to the Bankruptcy Code

Prior to the CARES Act, Congress was already working on significant changes to the bankruptcy code.  One of the most remarkable recent modifications to the bankruptcy code was the Small Business Reorganization ACT (SBRA) which became effective in February 2020. This created a new subchapter under Chapter 11 that is also known as Subchapter 5. This provides businesses with a certain amount of debt, faster and less expensive options for reorganization. If your business has inquired about Chapter 11 Bankruptcy in the past and the option was not financially viable, please reach out to us to see how the recent changes could make a Chapter 11 Bankruptcy a good fit for the business.

Call Bankruptcy Law Experts

Our firm is open and available to help you. Due to COVID-19, Acker Warren, P.C. will conduct your consultation remotely, through a video-conference or by phone. Don’t hesitate to contact us if you have any questions.

Filing for Bankruptcy: What You Need to Know

While the thought of filing for bankruptcy can be scary and intimidating for most people, it’s a way to get a fresh start for businesses and individuals facing overwhelming debt. If you are getting harassed by bill collectors, using credit cards to pay for your necessities, and you are unsure of how much debt you actually owe, you probably need to rethink your financial situation.

Filing for bankruptcy basically means that you have found yourself in a position that will take many years to repay in full the debts that you owe. Bankruptcy laws were created to provide people with a chance to start over. Whether you have made bad financial decisions or have had bad luck, you deserve a second chance.

What is Bankruptcy?

Bankruptcy is a court proceeding where a judge and trustee review the assets and liabilities of businesses and individuals who are unable to pay their bills and then deny or approve the discharge of those debts so the debtor is no longer legally obliged to pay them. However, the bankruptcy process has been streamlined so that very few bankruptcy filers ever actually go to court.

Should You File for Bankruptcy?

If you don’t see your financial situation getting any better anytime soon, bankruptcy may be a good option for you. Individuals make up around 97% of bankruptcy cases. Most people find that as soon as their bankruptcy has been discharged, typically less than 4 months in a Chapter 7, their Credit Score will improve. Most will be able to purchase a car and get a credit card immediately upon discharge. The ability to qualify for a mortgage returns for most people two years after a bankruptcy discharge. Bankruptcy can stop a foreclosure on a house, prevent the repossession of your car, and it stops the harassing calls of creditors.

If your mortgage, credit card debt, student loans, and medical bills have devastated your financial situation to the point where you don’t see the end of the struggle, bankruptcy may be the best answer for you. A bankruptcy filing will remain on a person’s credit report for 10 years from the date the case was filed, however, the filing will only have a minimal effect on ones ability to obtain credit for the first two years after discharge, presuming steps are taken to rebuild credit during that two year period. There is also an emotional benefit to bankruptcy in that you can remove the credit burden that has saddled you for many years and find relief from the stress of repaying high interest loans and credit cards.

Where to Start

First things first, you need to collect financial records. Gather your last two years of tax returns, paystubs for the last 6 months or profit and loss information for your business, information about your debts, and your household expenses so you have a better understanding of your situation. Once you’ve collected your documents, contact a competent bankruptcy attorney to discuss your financial situation. You will be required to fill out a workbook for your attorney and provide the documents that you have gathered. Your attorney will use those documents to prepare your petition and schedules that will be filed with the Court. You will be required to take a credit counseling course approved by the Department of Justice prior to your case filing. This course is online and takes approximately 45 minutes to complete. You will sign the documents that are to be filed with the Court and at that point your case will be ready to file.

If you’re looking for reliable bankruptcy lawyers, call Acker Warren, P.C. We have over 15 years of bankruptcy law experience in the Fort Worth and Arlington area in Texas, we’ve helped thousands of clients find debt relief and avoid foreclosure and repossession through the alternatives the financial system, chapter 13, chapter 11, and chapter 7 bankruptcy processes offer.