How Has COVID Changed Chapter 13 Bankruptcy Law?

The financial curveballs of life can sideline you from meeting your needs. When going through financial difficulties, declaring bankruptcy may be one of the best options to remedy your situation and give you a deserved fresh start. However, with new laws and the unprecedented circumstances surrounding COVID-19, filing for Chapter 13 bankruptcy may feel daunting. Thankfully, an experienced bankruptcy attorney can navigate you through the process.

Our experienced team of bankruptcy attorneys at Bond Law Office can answer all your questions regarding Chapter 13 bankruptcy and how recent legislation will impact filing. We proudly serve clients in Fayetteville, Fort Smith, Harrison, and the Arkansas River Valley area.

How Has COVID Changed the Law?

Indeed, the COVID-19 pandemic, as well as the subsequent Coronavirus Aid, Relief and Economic Security (CARES) Act, have changed consumer bankruptcy laws in the United States. Under the CARES Act, more consumers are now eligible for bankruptcy relief and protection in the event of financial hardship due to the COVID-19 pandemic. Furthermore, those who have previously filed for Chapter 13 bankruptcy are able to seek plan modifications or extend their payment period. Current bankruptcy filings may also be modified or extended. 

Understanding the CARES Act

In response to the COVID-19 pandemic, on March 27th, 2020, President Donald J.Trump signed the CARES Act into law. The CARES Act was designed to provide a $2 trillion economic stimulus package to support both individuals and businesses in the United States who have been impacted by the COVID-19 pandemic. The Act also revises certain provisions of the U.S. Bankruptcy Code in order to provide better and more effective bankruptcy relief to individuals, families, and small businesses.

How has COVID affected Chapter 13 Bankruptcy?

This new Act has affected Chapter 13 bankruptcy in the following ways:

Chapter 13 Plans May Exceed Five Years: Individuals and businesses who had their Chapter 13 bankruptcy confirmed before March 27, 2020, but are experiencing hardship due to COVID-19, may be able to modify and extend the repayment period for up to seven years after the first payment was due. This is to reduce monthly payment obligations.

Less Monthly Arrearage Payments for Creditors: Creditors will receive less monthly arrearage (money that was owed and should have been paid) payments in the modified plan if the consumer pays the Creditor’s arrearage over the seven years.

Coronavirus Related Payments Will Be Excluded From Income: Any coronavirus related payments which were received by individuals, families, and businesses from the federal government, such as a stimulus check, will not be considered “income” in determining eligibility for Chapter 13 bankruptcy. Therefore, such payment will not be included in their “disposable income” calculations.

How Permanent Are These Changes?

The changes resulting from the CARE Act are designed to maximize the benefit of COVID-19 relief and stimulus payments. However, the provisions of the Act relating to bankruptcy matters will only be valid for one year, until March 27, 2021. 

It’s important to note that while some creditors are giving individuals a 3-month forbearance, once that time period is up, full payment for the three months that were missed will be expected. So for example, if you were able to put off month payments of $1,000 for three months, on day 91 you’ll owe $3,000 which you may not be able to pay. 

How Can Legal Counsel Help?

Filing for bankruptcy in Arkansas is not uncommon. In 2019, there were 10,676 business and non­‐business filings with 5,492 consumers filing for Chapter 13. These consumers didn’t go through their bankruptcy filing alone, and neither should you. Especially during these uncertain times of COVID-19, an experienced attorney can provide the proper guidance and help you to review your options.

Our attorneys at Bond Law Office will review your case and determine if Chapter 13 bankruptcy is right for you. We will help you file your forms and represent you throughout the court proceedings. Also, we will handle any ongoing creditor harassments and negotiate with them to set up the best possible arrangement for your current financial situation. Our attorneys will advise you on how to rebuild your credit, avoid common pitfalls, and take proper steps to avoid potential financial difficulty.

Experienced Bankruptcy Attorney in Fayetteville, AR

If you are going through financial hardship and considering filing Chapter 13 bankruptcy, call the Bond Law Office today to schedule a free consultation. Our knowledgeable bankruptcy attorneys can offer you proper legal counsel and advocacy throughout the bankruptcy process. We proudly serve clients throughout Fayetteville, Fort Smith, Harrison, and the Arkansas River Valley area.


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