The COVID-19 pandemic is still gripping the global economy, and it appears that the problems will continue into 2021. Millions of Americans are out of work and worried about where their next paycheck will come from. Even though creditors understand what’s going on and they’re willing to work with you, there may come a point when you decide to file for Chapter 7 bankruptcy.
If you’re filing for Chapter 7 or Chapter 13 bankruptcy, you may have some new options under COVID-19 provisions set forth by the federal government.
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Some Government Benefits Are Exempt
Under the CARES Act, any stimulus money you received from the federal government doesn’t count towards your income you use to calculate your disposable income.
Missouri law still stipulates that other public benefits, such as unemployment compensation and Social Security benefits, are exempt from bankruptcy proceedings. This means you get to keep all of the funds from these types of assistance, and they can’t go towards paying debt.
Longer to Pay Chapter 13 Debts
For Chapter 13 bankruptcy, you have five years to pay off your debts in the restructuring plan. If you filed for Chapter 13 bankruptcy before March 27, 2020, and you’re experiencing a hardship due to COVID-19, you can modify your payment plan. Rather than five years, you may have up to seven years to pay off the plan. You’ll need to have a hearing in bankruptcy court before your restructuring takes effect.
After restructuring, your seven-year payment schedule is determined based on the date of your first payment under bankruptcy. For example, you made your first payment in June of 2019. If you receive a modification to seven years, your final payment is due in May of 2026 rather than May of 2024.
To receive this extension, you must petition the court within a year of the passage of the CARES Act. You have until March 2021 to do this for Chapter 13 bankruptcy.
Communication Is the Key
Whether you filed for Chapter 13 bankruptcy before COVID-19 happened or you’re considering filing for Chapter 7 bankruptcy now, communication is the key for both instances. Creditors are often willing to work with you to modify or restructure your loans to defer missed loan payments. Creditors can even agree to modify a Chapter 13 plan that’s already in place. Don’t be afraid to negotiate or talk to your creditors. Having a bankruptcy attorney on your side may help in this regard.
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Talk to a Bankruptcy Attorney at Groce & DeArmon
Filing Chapter 7 bankruptcy can stop wage garnishments and debt collections immediately. Contact Groce & DeArmon or call toll-free 1-800-640-3706 in Missouri or (417) 862-3706 to schedule a free consultation about filing for bankruptcy.