Bankruptcy After Covid-19

In the midst of Covid-19, Congress passed a relief package which included changes to bankruptcy law after Covid-19.

Most attention to the federal government’s corona virus bill focused on stimulus payments. People looked for help to those unemployed by the pandemic.

Unemployment claims skyrocketed

Congressional action gave relief to those unemployed and promised money over and above pre pandemic benefits.

At the same time, Congress, as it always does, included other issues in the new law including changes to bankruptcy after Covid-19.

What Changes to Bankruptcy After Covid-19?

Stimulus payments of $1,200 plus, depending on how many dependents you have fall outside the “means test”. This means the payments received from the federal government do not count towards this test, which disqualifies higher income individuals and households from filing Chapter 7 bankruptcy. Congress passed this change to the Bankruptcy Code to help individuals and families receive full benefit of the payments without preventing them from eligibility to file Chapter 7.
People already in Chapter 13 plans who have suffered a “material financial hardship” due to COVID-19 may stretch the plan period out to seven years. The unprecedented action changes previous bankruptcy law limiting plans to either 3 years or 5 years. This can reduce the monthly Chapter 13 payment and extend a plan over a more reasonable time period.
New bankruptcy forms. Following emergency COVID-19 orders the bankruptcy court changed the language on two forms. Filing the classic forms can cause dismissal of the case. Bankruptcy court officials changed language on the official form for the Voluntary Petition and also the Means Test form.
Signature requirements in many jurisdictions now allow attorneys to file without “wet signatures” by clients. But the COVID-19 emergency changes still require clients to review all forms before filed. This eliminates face to face in office personal meetings. But it still means that those filing must review the bankruptcy petition, schedules and other paperwork.

What’s behind the changes?

The first two changes above actually came out of the first Covid-19 stimulus passed by Congress. Also known as the “Cares Act”, or Coronavirus Aid, Relief, and Economic Security Act the legal citation for anyone wanting to delve into the actual language is Pub. L. No. 116-136, 134 Stat. 281.

The third bullet point refers to amended bankruptcy forms the courts put together as a result of “Cares Act” language.

As for the fourth point, some jurisdictions sought to allow for relaxed rules letting attorneys file bankruptcy forms absent an actual face-to-face meeting.

Bankruptcy law finds its roots in the U.S. Constitution. (Article I, Section 8.) But the way bankruptcy works faces constant revision by court officials.

Filing Bankruptcy after Covid-19

Many people already faced overwhelming bills and the need to juggle finances before Covid-19. But when the new strain of the coronavirus hit, it changed nearly everything and shut down the economy. Some credit card companies and debt collectors understand and show willingness to work with their customers. Others, not so much.

While courts and lawmakers often make changes to bankruptcy law such as those above, bankruptcy basics remain largely unchanged. Chapter 7 wipes out debt for below average income earners with assets under the level of exemptions granted by state and/or federal law. Chapter 13, often called a ‘wage earners payment plan’ can stop foreclosure for property owners with enough income to fund a three to five year plan to make up for any arrearage.

Bankruptcy Documents

Bankruptcy after Covid-19 presents a few changes intended to help people with a lack of income due to lack of employment. Notably, stimulus payments win exclusion from the “means test” meaning they will not in and of themselves disqualify anyone from filing a Chapter 7 bankruptcy. At the same time overall bankruptcy procedure remains the same, requiring full completion of documents often referred to as the petition, schedules and statements. An experienced bankruptcy attorney offers the best bet to navigate through the issues.

The Law Offices of Andrew D. Myers represent consumer bankruptcy filers in Massachusetts and New Hampshire. That means our free initial consultation offers the opportunity to ask about your situation, your debt, any collections against you or whatever is bothering you about personal finances.

Our office provides help in New Hampshire and Massachusetts to those in debt and looking for a solution. Consumer bankruptcies include Chapter 7 and Chapter 13. Allow us to review your situation, look at your overall finances and determine if bankruptcy presents the best solution.

Our office always provides a free initial consultation.

Andrew Myers

Attorney Myers is a member of the American Association For Justice, Massachusetts Academy of Trial Attorneys, New Hampshire Association For Justice, National Association of Consumer Bankruptcy Attorneys & Rotary International. Legal services provided in Massachusetts (MA) and New Hampsire (NH).