How To Financially Survive COVID-19: Part 2

In our last blog, we provided information about the CARES Act stimulus checks, potential scams, and student loans, as well as general tips for paying your bills during the COVID-19 pandemic. We will now dive into a discussion about managing debt during and after a national emergency.

Bankruptcy And The CARES Act

Bankruptcy is one of the most effective methods of reorganizing, reducing, and discharging debt. Due to our country’s current economic crisis, Congress included several provisions in the CARES Act that temporarily adjust the Bankruptcy Code, making this form of debt relief more accessible to both individuals and businesses.

Lasting for one year, these changes are as follows:

• Those currently in open Chapter 13 proceedings can modify their repayment plans if they face financial hardship due to COVID-19. Repayment plans under this form of bankruptcy last 3-5 years, but the CARES Act provision allows filers to extend existing plans to 7 years, thus lowering their monthly payments.
• Federal relief through the CARES Act (e.g. stimulus checks, grants, etc.) will not be considered in the Chapter 7 means test or Chapter 13 disposable income calculations. This provision allows filers to take full advantage of the federal relief without adversely affecting their bankruptcy cases.
• The debt threshold for Subchapter V of Chapter 11 has increased from $2,725,625 to $7,500,000. More businesses will now be able to qualify as small businesses under Subchapter V and use Chapter 11 to reorganize and reduce their debt without losing their company.

Amidst the chaos of the pandemic and subsequent court closures, you may believe this is not a good time to file bankruptcy. Due to the CARES Act provisions, however, now may be the best possible time to file. Bankruptcy courts are still accepting cases, and many courts have relaxed certain requirements such as in-person hearings and “wet” signatures (rather than faxed or photocopied signatures).

As long as you adhere to deadlines and take advantage of our years of experience, you can greatly benefit from bankruptcy at this time. It is perhaps the only long-term solution to unmanageable debt, and we are here to help you file successfully.

Credit Reporting During The Pandemic

Protecting your credit score during COVID-19 may be a challenge, especially if you experience an unexpected layoff or staggering medical expenses. Fortunately, the CARES Act may protect you from negative credit reporting in certain circumstances.

Specifically, your creditor cannot report a delinquent payment if:

• You and your creditor agree to some form of payment relief due to COVID-19; AND
• You were current before this agreement.

Examples of payment relief include loan or contract modifications, forbearance, or allowing you to defer a payment or make a partial payment. You must adhere to the terms of this agreement if you want to maintain protection against negative reporting.

We recommend reaching out to your bank, lenders, and insurance or utility companies as soon as possible to see if any of them are offering these kinds of relief during the pandemic. They may forgive missed payments or work with you to lower monthly fees. In general, they will be much more likely to provide flexibility if you reach out before missing a payment.

We also suggest frequently checking your credit report. Mistakes are common, and so are scams—particularly during a national emergency such as COVID-19. If you discover inaccuracies or other issues, you can formally dispute and potentially remove them.

Debt Collection

Currently, the government has not passed any legislation preventing your creditors from collecting your debt during the COVID-19 pandemic. If you need all collection actions to stop, we can assess your situation and determine whether bankruptcy (and the automatic stay it imposes) is right for you. As always, we recommend responding to notices from creditors as soon as possible to prevent the court from automatically granting a judgment against you.

Collection attempts can compromise your bank accounts, wages, and property ownership. They can even jeopardize your CARES Act stimulus check if the IRS deposits the payment into a bank account your creditor has frozen.

Communicating With Your Creditors

A powerful way to stay on top of your debt, credit report, and bills is to communicate with your creditors as much as possible. If you cannot pay a bill, we recommend communicating this to them in writing before you miss the payment.

Written communication is particularly important because:

• Wait times for phone calls have significantly increased due to COVID-19
• Your creditor may take insubstantial or inaccurate notes during a phone call
• Creditors may break promises to borrowers if the promises were not in writing

Even if your creditors haven’t agreed to provide relief, written communication can demonstrate your proactiveness and diligence in case your creditor takes you to court or you decide to file bankruptcy. As we said before, communication also provides you the opportunity to take advantage of any relief programs your creditors may be offering.

Let Bach Law Offices, Inc. Help You Manage Your Debt

Whether we help you file bankruptcy, negotiate with your creditors, or represent you in court, you can trust our team to handle your case with the utmost care and attention to detail. We understand the level of stress you may be facing during this global crisis, and we want to be the ones to help you survive the resulting economic hardship.

To keep our team, clients, and community safe during COVID-19, we are offering virtual consultations. Call (847) 440-5998 or fill out our online contact form to request yours today.