Bankruptcy During The CARES Act

(Corona Virus Aid, Relief, & Economic Security Act)

Even if you haven’t been tracking the news about COVID19 closely, someone has likely informed you that the government will be releasing an economic stimulus check across the country to help counteract the impact Coronavirus has had on many families and businesses. On March 27, 2020, the CARES act was enacted in an attempt to relieve this economic hardship. This act has the ability to provide relief for small business debtors and individual debtors under both Chapter 7 and Chapter 13 bankruptcy filings. This relief is currently temporary and set to expire March 27, 2020.

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Homeowner and Renter Protection Amid COVID-19

should we file for bankruptcy

In the wake of COVID-19, many Americans and Georgians are experiencing income loss and financial insecurity. Changes at the federal, state, county, and city level have been enacted to protect homeowners and renters from eviction and foreclosure.

Additionally, individual taxpayers are eligible for a rebate check to provide a small amount of economic relief.

Homeowners

  1. The CARES Act provides two forms of relief for homeowners: blockage of foreclosure proceeding and the option to request 180 days of forbearance on their mortgage.
  2. Protection from Foreclosure – Section 4022 protects homeowners from being evicted and also prevents lenders from initiating foreclosure procedures for 60 days beginning March 18, 2020.

Payment Deferment

Additionally, Section 4022 states homeowners experiencing financial hardship related to COVID-19 can request forbearance for 180 days. Forbearance is temporary relief offered by a lender to pause or reduce payments. A request for payment deferment can be requested more than once. When forbearance is granted, late fees and penalties are not applied. Forbearance is NOT automatically provided. The homeowner must make a request.

It is important to note that these options only apply to federal mortgages made by the following agencies:

  • Federal Housing Administration
  • Department of Housing and Urban Development
  • Department of Agriculture
  • Department of Veterans Affairs
  • Freddie Mac
  • Fannie Mae

Over 60% of U.S. mortgages are federally-backed. Contact your service provider (the bank you make a payment to) to determine if your mortgage is federally-backed.

Many lenders are offering similar options for mortgages held by private lenders. Some states, (not Georgia as of the writing of the article) have partnered with banks to offer homeowner relief.

Renters

Renters are not automatically protected against eviction during COVID. Section 4023 of the CARES Act offers a 120-day eviction moratorium if the renter/tenant resides in:

  • federally subsidized housing
  • a property with a federally backed mortgage loan

The National Multifamily Housing Council has requested that evictions be suspended for renters that have been financially impacted by COVID-19. A request to avoid rent increases for 90-days was also submitted.

Protection for Georgia Renters

Georgia currently has no official eviction moratoriums in place.

On March 17th, Atlanta Mayor Bottoms issued an executive order pausing residential evictions and filings for 60 days. The order applies to the following agencies:

  • Atlanta Housing Authority
  • Atlanta Beltline Inc.
  • Fulton County / City of Atlanta Land Bank Authority
  • Invest Atlanta
  • Partners for Home
  • City of Atlanta’s Department of Grants and Community Development

The silver lining is that Georgia’s Chief Justice declared a Statewide Judicial Emergency, suspending all but “essential functions” of the courts until April 13th. A private landlord could file an eviction notice, but the majority of courts are not hearing eviction proceedings as part of the suspension. (A county court could deem eviction hearings as “essential”.)

Economic Relief

The recently signed CARES Act provides a rebate for individual (non-businesses) taxpayers.

Individuals with adjusted gross income up to $75,000 may receive $1,200 or $2,400 for married couples filing joint returns with adjusted gross income up to $150,000. An additional rebate of $500 per qualifying child is available.

Independent tax policy nonprofit Tax Foundation offers a CARES Act Rebate Calculator to determine the amount of your economic impact payment.

The Treasury Department and the IRS announced that economic impact payment will begin to be distributed around the 3rd week of April. Amid much confusion and controversy, Treasury Department Secretary Steven T. Mnuchin issued an additional statement to clarify that

“Social Security recipients who are not typically required to file a tax return do not need to take an action, and will receive their payment directly to their bank account.”

The economic impact payment is currently slated to be a one-time occurrence.

Contact an Experienced Bankruptcy Attorney

If are facing a potential foreclosure or eviction or financial hardships, contact an experienced bankruptcy attorney. Filing bankruptcy may allow you to avoid foreclosure while starting fresh.

In order to slow the spread of COVID-19, Cherney Law Firm is currently offering free video-chat consultations.

Please contact us at 770.485.4141 to set up your appointment with Mr. Cherney.

Know the law and your rights.

Tax Season: Bankruptcy and Income Tax Refunds

Tax season is upon us, and many people think about a fresh financial start this time of year

When it comes to filing yearly taxes, it is an opportunity to assess current goals and whether current financial strategies are working efficiently. If you have filed a Chapter 13 case and are having trouble making your current plan payments, you may want to consider a conversion from a Chapter 13 Bankruptcy to a Chapter 7 Bankruptcy.

The main benefit of converting from a Chapter 13 Bankruptcy to a Chapter 7 Bankruptcy is that you will no longer have a monthly trustee payment

You can use your income tax refund to bring any outstanding secured obligations current with the lender (e.g. vehicle, mortgage). You will only have one case filed with the same case number, even if you convert from a Chapter 13 to a Chapter 7. Only one bankruptcy filing will show on your credit, rather than having a dismissed Chapter 13 case and a later filed Chapter 7.

Another major benefit of converting your case from Chapter 13 to Chapter 7 is that you can add any debts incurred after you filed your Chapter 13 case. If you incurred new debt during your Chapter 13 that is making it difficult to make your Chapter 13 payments, then a conversion can help alleviate this problem. Some examples of new debt can include new medical bills, or an unexpected, costly home repair.

In order to convert your case from Chapter 13 to Chapter 7, a notice will need to be filed with the Court

There are certain conditions that need to be met. Your bankruptcy attorney will discuss these with you.

With a Chapter 7, there is no monthly payment plan like there is with a Chapter 13. You will still have the automatic stay in effect during the length of your case. However, the Trustee may sell any non-exempt assets that you have in order to pay your creditors. This is known as liquidation.

Once a Chapter 7 case is finished, you receive a discharge of all debts that were part of your case. This occurs in a much shorter time period than for a Chapter 13 case, since there is no repayment plan. In many instances, converting your case from a Chapter 13 to Chapter 7 may be less costly than filing for a Chapter 13 and then having to file a separate Chapter 7 if your Chapter 13 case was dismissed.

An experienced bankruptcy attorney will assess your case to make sure conversion makes sense for you. There can be major benefits to converting your case from a Chapter 13 to a Chapter 7, but it is critical to understand all the implications.

If I am Married, Can I Still File Bankruptcy Individually?

Many people wonder if it is possible to file for bankruptcy without their spouse being part of the bankruptcy. This article will answer this question.

There are several key things to consider when filing for bankruptcy if you are married

First, a married person can either file bankruptcy along with his/her spouse or file individually. Usually, married couples file together when they have joint debts. However, one spouse can file by him/herself if desired. If both spouses want to file for bankruptcy, it is best to file jointly. This way, you pay only one filing fee and one attorney fee.

If preventing a bankruptcy from appearing on your spouse’s credit report is important, then you may consider filing individually.

Second, if there are joint debt(s) (i.e. debt(s) in both spouse’s name(s)), and only one spouse files for bankruptcy, then the creditor is not barred from pursuing payment, or collecting the debt from the non-filing spouse.

Third, the issue of income of the non-filing spouse is just as important as the income of the filing spouse. Provided both spouses live in the same home, both incomes count. This will be determined by the Means Test. The Means Test does two things: 1) it determines the individual’s eligibility for Chapter 7; and 2) if he or she is not eligible for Chapter 7, the Means Test establishes what they may be required to pay back to their creditors in Chapter 13.

If the total income falls below the median income level in the state where the bankruptcy is filed, then Chapter 7 is an option

This would eliminate completely eliminate all debt that is not reaffirmed. If the total income is above the median income level in the state where the bankruptcy is filed, then the only bankruptcy option is Chapter 13. This requires repayment of some or all the debt over a period of up to five years.

Several other factors that you and your attorney will discuss to determine whether or not to file jointly include:

  1. the amount of property you own
  2. the type and amount of joint debts
  3. the exemption laws of the state in which you file.

Since filing for bankruptcy individually can still have consequences for your spouse, it is very important to meet with a qualified attorney to make sure you are making the correct choice for the both of you.

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