COVID'S EFFECT ON BANKRUPTCY
Life's financial curveballs can strike unexpectedly and sideline you from paying bills, debts, and meeting your day-to-day needs. When experiencing financial adversity, declaring bankruptcy can help you remedy your situation and get a fresh start. However, with new laws and the uncertain circumstances surrounding COVID-19, filing for bankruptcy may seem overwhelming. Fortunately, a knowledgeable California bankruptcy attorney can offer proper guidance and help you navigate the often complex legal system.
Our dedicated team at The Orantes Law Firm can answer all your questions regarding filing bankruptcy and how recent laws will impact your filing. We are proud to serve individuals and businesses in Los Angeles County and Orange County, California.
BRIEF OVERVIEW OF BANKRUPTCY
Bankruptcy is a tool designed to help individuals, families, and businesses get financial relief when going through financial difficulties or overwhelmed with debt. Through bankruptcy, you can be relieved from repaying some or all of your debt. Two of the more common bankruptcy options in California include Chapter 7 and Chapter 13.
CHAPTER 7 BANKRUPTCY
Also known as "liquidation" bankruptcy, Chapter 7 offers individuals and businesses the opportunity to eliminate their unsecured debts. In Chapter 7, the trustee collects all your assets and sells those that are not "exempt." The trustee is an independent contractor appointed to oversee your bankruptcy case.
Chapter 7 is the best to file if you don't own any property. However, this bankruptcy option is based on your income from the past six months. You will be required to be within the income limits to file Chapter 7. Due to the COVID-19 pandemic, many people who were furloughed or unemployed for three months may now qualify for Chapter 7 since they would have a lower overall income. You can take advantage of your lower-income and file right away.
Also, Chapter 7 will give you a few months to catch up on tenant issues. Filing for Chapter 7 can offer you and your family relief by helping you stop or delay an eviction proceeding temporarily.
CHAPTER 13 BANKRUPTCY
California residents earning a good income but overwhelmed with debt may be able to gain relief and financial freedom through a Chapter 13 bankruptcy. In Chapter 13, the court will establish a structured payment plan to repay your debt. Chapter 13 usually allow debtors filing for bankruptcy to propose a repayment plan of up to five years to the creditor. However, recent legislation now allows individuals and businesses who are experiencing hardship due to COVID-19 to modify and extend the repayment period for up to seven years.
CARES ACT
In response to the effects of COVID-19 pandemic on individuals, families, and businesses in the United States, President Donald J.Trump signed the Coronavirus Aid, Relief and Economic Security (CARES) Act, into law on March 27, 2020. The CARES Act is designed to provide better and more effective bankruptcy relief as well as a $2 trillion economic stimulus package to support both individuals and businesses in the United States who have been affected by the COVID-19 pandemic. The CARES Act offers the following provisions:
Federal Payments are Excluded from "Income": Federal payments received by individuals, families, and businesses will be excluded from "income" when determining eligibility for Chapter 13 bankruptcy.
Plan Period Extensions: Anyone who had their Chapter 13 bankruptcy confirmed before March 27, 2020, but are facing hardship due to the COVID-19 pandemic, may be able to modify and extend the repayment period for up to seven years after the first payment was due.
The provisions of the CARES Act are valid for one year from the date of enactment.
SMALL BUSINESS REORGANIZATION ACT EFFECT ON BANKRUPTCY
The CARES Act also raised the maximum allowable debt limit of the Small Business Reorganization Act (SBRA) from approximately $2.7 million to $7.5 million. This will allow companies and businesses with up to $7,500,000 in secured and unsecured non-contingent and liquidated debt to reorganize using Subchapter V. However, the Act's provisions regarding bankruptcy matters will only be valid for one year, until March 27, 2021. Under the new provisions, the reach of the Act will greatly expand beyond businesses it otherwise would have covered.
HOW CAN LEGAL COUNSEL HELP?
In 2019, there were 69,432 business and non‐business bankruptcy filings in California. If you are considering bankruptcy during these unprecedented times, it is crucial to consult with an experienced attorney for proper guidance.
The Orantes Law Firm will evaluate your unique situation and determine which bankruptcy option is right for you. We will help you with the following:
File your forms
Represent you throughout the court proceedings
Handle any ongoing creditor harassments
Negotiate with creditors to set up the best possible arrangement for your current financial situation.
Our team will also advise you on how to rebuild your credit, avoid common pitfalls, and take adequate precautions against potential financial adversity.
EXPERIENCED BANKRUPTCY ATTORNEY IN LOS ANGELES COUNTY, CALIFORNIA
If you are going through financial adversity and considering filing bankruptcy, call The Orantes Law Firm today to schedule a one-on-one consultation. Our firm has over 20 years of experience helping clients like you get a fresh start. We are proud to serve individuals and businesses in Los Angeles County and Orange County, California.