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COVID-19 And Bankruptcy
What You Need To Know If You Are In The Process Of Filing For Bankruptcy During the COVID-19/Coronavirus Crisis
Although the bankruptcy courts are not allowing personal appearances, they are open for business as usual, and other than not being able to meet face-to-face in my office the process for filing a bankruptcy is not substantially different than it was before the COVID-19 crisis.
Chapter 13 confirmation hearings and hearings on miscellaneous chapter 13 matters may are still proceeding, however, there are no personal appearances, only telephone appearances are allowed.
The 341 meeting of creditors have been delayed, which resulted in extensions of time in all of the cases delayed including discharge. Now that the Trustees have a system for teleconferencing 341 meeting of creditors and video conferencing for chapter 13 341 meeting of creditors time schedules should be back on track.
Filed In The Past And Are Mid-Bankruptcy:
Stimulus Checks – will they be forfeited in a bankruptcy? In a chapter 13 bankruptcy, the funds will not need to be paid into the bankruptcy estate, in an already filed chapter 7 bankruptcy, you may need to go back and exempt the funds. This is not clearly set out in the CARES act; therefore, we would advise exempting the funds.
Relief payments – how will they impact income when filing for Ch. 7 or 13? Other than exempting the funds in the bank, there will be no effect on filing either a chapter 7 or chapter 13 bankruptcy case.
Considering Filing For Bankruptcy:
Filing for bankruptcy at the moment is still possible. We have a process set up to assist persons in dire financial crisis.
Is An Automatic Stay Still Possible During This Time?
Yes, as soon as you file bankruptcy the automatic stay protects you. Nothing has changed regarding the imposition of the automatic stay.
Can I Get The Creditors To Stop Calling Me Now?
Yes, we have a process where we direct all communications through our office prior to filing bankruptcy. That process is fairly simple and if you have retained us with a partial payment of fees, we will send notice to creditors to cease communication with you. If they continue, they are in violation of several state and federal laws, this is what causes the creditors to stop calling you.
Should I Wait To Get My Stimulus Check Before Filing For Bankruptcy?
The answer to this question is really up to your current situation. The stimulus check cannot be used to determine whether you are eligible for filing bankruptcy. If you file for Chapter 13 bankruptcy, you will not have to turn your stimulus check over to your creditors. If you file a Chapter 7 bankruptcy, you need to exempt the funds. If you wait until you receive the funds and spend them then there is nothing to worry about.
The United States Trustee issued a Notice to Chapter 7 and 13 Trustees Regarding Recovery Rebates Paid to Consumer Bankruptcy Debtors Under the Cares Act of 2020, on April 7, 2020, which stated “[t]he Act is silent as to whether the recovery rebate is property of the estate. In chapter 7 cases, the “property of the estate” issue will only arise in cases filed after March 27, 2020, the effective date of the Act. Regardless of whether the rebate is property of the estate, the United States Trustee expects that it is highly unlikely that the trustee would administer the payment after consideration of all relevant circumstances, including: the modest amount of the recovery rebate; the applicability of state and federal exemptions; any interest of a non-debtor spouse in the recovery rebate; the cost to the estate of recovering and administering the recovery rebate, including litigation with debtors who may seek a judicial determination; and the extent to which recovering the recovery rebate will enable creditors to receive a meaningful distribution.”
Looking at this from an experiential aspect of what Chapter 7 Trustees have done in the past, the Stimulus of a family of 4 would be typically $3,400.00 ($1,200×2+500×2) which would mean Trustee Compensation of $800.00 (25% of the first $5,000) and distribution to creditors of $2,400.00. In my experience most of the chapter 7 Trustees I have worked with would seek turnover of this amount of money which could result in about a 5% distribution to $50,000 in filed claims.
It is very important to discuss your individual circumstances with an attorney prior to filing bankruptcy to ensure the stimulus does not go directly to your creditors without helping your family.
For more information on Filing Bankruptcy During COVID-19 Crisis, a consultation with an experienced California Bankruptcy Attorney is your next best step. Get the information and legal answers you are seeking by calling (916) 685-7878 today.
Mr. Cianchetta is an OUTSTANDING attorney. I was a little nervous about seeing an attorney for my case. Mr. Cianchetta and his staff made my wife and I feel right at ease. He took extra time explaining what to expect before, during and after our process. His advice was right on!- Jack M.