By: Howard Schneider | Reuters  May 5, 2020From: stltoday.comWASHINGTON — Overall U.S. bankruptcy filings fell in April compared to the year before, a possible sign the massive Federal Reserve and government response to the coronavirus pandemic may have helped stave off economic damage, or at least provided enough hope to families and firms to try to wait it out.In a potential warning sign, however, filings of the Chapter 11 bankruptcies used by companies to restructure their debts jumped 26% to 560 last month, from 444 in April, 2019, according to data compiled by Epiq Systems and provided by the American Bankruptcy Institute.The 2,270 Chapter 11 filings through April is the largest four-month total since 2013.Overall, bankruptcy filings by households and companies fell sharply to 38,428 from 71,303 a year ago, a decline of 46%.ABI's executive director, Amy Quackenboss, said in a statement that the steps taken by the federal government beginning in March "have likely staved off bankruptcy filings to date."Those measures included loans to help small businesses stay afloat, one-off emergency payments to families, and unemployment benefits expanded to be both more generous and available for the first time to groups of people like self-employed entrepreneurs and contractors.Banks have been encouraged by the Fed to give strapped customers leeway with loan payments, landlords urged to do the same by local governments, and many utility firms have suspended disconnections for overdue bills during the crisis — all steps that may help keep family and business finances intact for now.Like recent economic data, however, the true picture may only emerge over time, as social distancing rules are eased, firms see whether customers return, and laid-off workers have a more accurate sense of whether they will be asked back to their old jobs.The small business loans, for example, are designed to cover about two months of payroll, though it remains uncertain whether business will be back to normal by then for thousands of restaurants, hotels and others in the hardest-hit sectors.

From: The Philadelphia Tribune By: Amy HaimerlMay 4, 2020https://www.phillytrib.com/news/health/coronavirus/when-does-a-small-business-file-for-bankruptcy-and-more-questions/article_4513950c-b99f-5677-a5a8-6b57526f0b17.html

Subchapter V, which is not a new chapter of the Bankruptcy Code, but a subchapter within Chapter 11 of the Bankruptcy Code, holds the possibility of improving the likelihood of reorganization for a viable small business debtor by reducing the time, the expense and eliminating certain legal impediments to confirmation of a Chapter 11 plan reorganizing a debtor. 1. The purpose of this new section of the Bankruptcy Code is to allow business debtors and certain individuals engaged in business with debts below $ 7,500,000  to reorganize their obligations under Chapter 11 without the need for obtaining the consent of a class of “impaired” creditors as required under basic 2. Subchapter V is for the small business debtor who must be an entity engaged in commercial or business activity with aggregate non-contingent liquidated secured and unsecured debts of $7,500,000 or less, excluding debt owed to affiliates or insiders. Congress increased the cap to $7,500,000 for the next year as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act from $2,725,625.00.3. Non-contingent debt refers to a debt that is owed at present without any contingent acts needing to occur first.4. Contingent debt is one in which there is a 'triggering event' or some condition precedent for the debt to exist.5. United States Trustee Quarterly Fees have been eliminated. Other than the initial filing fee, fees are essentially eliminated, making the process much less expensive to the petitioner.6. Creditor committee requirement has been eliminated (only formed for cause in Subchapter V cases)7. Cram Down has been simplified. In Subchapter 5, if the creditors can’t agree on the petitioner’s proposed plan, an application can be made to the Bankruptcy Court Judge to order the plan approved.  -Cram Down standard-The success of the proposed plan need only be more attractive to the unsecured creditors than would a conversion to a Chapter 7 liquidation plan (creditors get $1 more under Subchapter V)8. Documents needed to file under Subchapter V-the entity will require the business’ most recent balance sheet, statement of operations, cash flow statement, a federal income tax return (or a sworn statement that such a document does not exist). 9. Plan must be submitted for approval within 90 days. However, the Bankruptcy Court may extend this deadline “if the need for the extension is attributable to circumstances for which the debtor should not justly be held accountable.” (in the COVID-19 environment, courts are likely to grant extensions liberally)10. Disclosure Statement not required. The Act eliminates the requirement that a disclosure statement is filed, thereby reducing costs to the debtor and streamlining the plan confirmation process. However, the debtor must include in the plan certain information customarily included in a disclosure statement, such as a short history of the debtor, a liquidation analysis, and financial projections reflecting the ability of the debtor to make the payments required by the plan11. Trustee-under Subchapter V, a trustee is automatically appointed, but the debtor retains control of its assets and operations. trustees have the authority to investigate the debtor’s financial affairs. The trustee’s primary function is to facilitate a consensual plan among the debtor and its creditors, almost like a mediator would facilitate a settlement in litigation. [the trustee’s duties will include facilitating the development of a consensual reorganization plan, appearing at major hearings in the case, and ensuring that a debtor commences making timely payments under a plan]-Under the supervision of the Department of Justice, approximately 250 Subchapter V trustees – mostly attorneys and accountants – were selected out of over 3,000 applicants. Most Subchapter V trustees had recently received their first case assignments when the COVID-19 pandemic hit.12. Timing of Subchapter V Filing. Small businesses should carefully consider the timing of a Subchapter V filing: the Borrower Application Form promulgated by the U.S. Small Business Administration indicates that applicants presently subject to a bankruptcy proceeding are ineligible for the Paycheck Protection Program (PPP). 13. Requirements to file Subchapter V. To be eligible for relief under Subchapter V, a debtor (whether an entity or an individual) must be engaged in business and one-half or more of the debt must have arisen from business, as opposed to personal, activities. Finally, single asset real estate debtors are ineligible for relief under Subchapter V Plan Term -Consistent with current practice in Chapter 13 cases, a reorganization plan will customarily be three years in length but may be as long as five.14. Impaired Class. Under Subchapter V, a plan can be confirmed without the vote of an impaired accepting class, providing that the plan does not discriminate unfairly and is deemed “fair and equitable” as to each class of claims. To meet the “fair and equitable” requirement under the Bankruptcy Code, Subchapter V requires that all of the debtor’s projected disposable income during the length of the plan be applied to plan payments.15. Disposable Income. Subchapter V defines “disposable income” as income received by a debtor and that is not reasonably necessary to: (1) maintain and support the debtor or a dependent; (2) satisfy domestic support obligations that first become payable after the bankruptcy case is filed; or (3) continue, preserve, or operate the business.16. Elimination of the Absolute Priority Rule.  Subchapter V  eliminates the Absolute Priority Rule, under which a debtor cannot retain an ownership interest in its assets unless all creditor claims are paid in full or the debtor contributes new value to fund the Plan. Under Subchapter V no “new value” contributions are required as a condition of the debtor’s asset retention. 17. Modification of Loans Secured by the Principal Residence Under existing law, loans secured by a debtor’s principal residence may not be modified under a bankruptcy plan. Under Subchapter V if the proceeds of a business loan were used to finance a debtor’s business, the loan may be modified.  However, the claim of a secured creditor who loaned money to a debtor to acquire the debtor’s residence, may not be modified18. Discharge. If the Bankruptcy Court confirms a consensual plan, a debtor is entitled to a discharge upon confirmation. If the Bankruptcy Court confirms a nonconsensual plan, a debtor receives a discharge after completing all payments due within the first three years of the plan, unless otherwise ordered. If all such payments are made, the debtor would be relieved of liability except for future payments due under the plan.  JHS

Will Filing for Bankruptcy Allow Me to Keep My Car? Your car is likely one of the most valuable things you own. Not only is likely worth more money than any item you own besides your house, but it also serves a highly valuable role, helping you get to work, the doctor, and other places you need to go quickly. Without a car, you likely wouldn’t be able to work, and you’d have a very hard time caring for your children or even tending to your own needs. Understandably, one of the first things people are worried about when they consider filing for bankruptcy is whether they will get to keep their car. (Worrying about keeping their house, if they have one, is usually the first concern.) You’ll need to talk to a Gilbert bankruptcy attorney about your particular circumstances to know for certain how bankruptcy can impact your vehicle. However, in most cases, you can expect to be able to keep your car. Chapter 7 Bankruptcy You have to pass a means test in order to qualify to file for Chapter 7 bankruptcy in Mesa. You have to show that your income falls under a certain threshold and that you don’t have assets that are worth more than a certain amount. Also, under Chapter 7 bankruptcy, you can exempt some of your assets from the bankruptcy trustee if they fall under a certain value. In Arizona, your vehicle is exempt from bankruptcy proceedings if the equity is less than $5,000 (if you are filing on your own). If you have a car that’s currently valued at $15,000, yet you still owe $13,000 on it, your equity is only $2,000, and the car is exempt under Chapter 7 bankruptcy rules. You will be able to keep that car. The exemption is $10,000 if you are disabled or you are married ($5,000 each for two vehicles or $10,000 for one vehicle). If your car has more equity than the exemption, the bankruptcy trustee has the right to seize it and sell it to satisfy your debts. However, that doesn’t mean that’s what will happen. The trustee can also abandon the property, deciding that it’s not worth the effort to sell it, and you will be allowed to keep the car. Because your car is a secured debt, you cannot discharge what you owe in bankruptcy. So, if you have fallen behind in payments or you have decided that you don’t want to pay on the car anymore, the only option is to let the lender repossess the vehicle. You cannot discharge the debt and keep driving the car. Chapter 13 Bankruptcy A Mesa Chapter 13 bankruptcy filing reorganizes your debt so that it is more affordable. If you own your vehicle outright, it should be unaffected by a Chapter 13 filing. However, if you are still paying toward your vehicle, it can be included in your repayment plan – and that may result in you paying less for the vehicle. For example, say your vehicle is valued at $10,000, yet you still owe $13,000 on it, only that $10,000 is considered secured debt. The remaining $3,000 will be rolled into the finance plan for your unsecured debt. By the end of your repayment plan, if any of that balance is left, it is discharged. Leased Vehicles Typically, you would continue to pay your lease and drive your vehicle after you file for bankruptcy. Under a Chapter 7 filing in Mesa, you have to file a “Statement of Intention for Individuals Filing under Chapter 7” within 30 days to declare your desire to continue leasing the vehicle. Failure to do so could result in your vehicle being repossessed. Declaring your intent to keep the vehicle means that you continue to make payments, as well as any extra charges for going over mileage or for damages. If you want to keep leasing your vehicle under a Mesa Chapter 13 filing, you need to discuss it with your bankruptcy attorney as the rules are bit trickier. However, you should be able to continue leasing. Filing for bankruptcy often allows you to get maximum debt relief without stripping you of the few assets you may have. However, every case is unique, so it is important that you meet with an experienced bankruptcy attorney serving Glendale who can review your financial details and give you a clear picture of how bankruptcy can help (or how it may have a potentially negative impact in the case of assets). Call My AZ Lawyers today to talk with a bankruptcy attorney about your options for debt relief. We help clients with both Chapter 7 bankruptcy and Chapter 13 bankruptcy. Our goal is to maximize your debt relief while also helping you keep as many of your assets as possible. We serve clients throughout the Phoenix area, including in Mesa, Glendale, and Tucson. Call us today to speak with a dedicated bankruptcy lawyer. Arizona Offices: Mesa Location: 1731 West Baseline Rd., Suite #100 Mesa, AZ 85202 Office: (480) 448-9800 Email: [email protected] Website: https://myazlawyers.com/ Glendale Location: 20325 N 51st Avenue Suite #134, Building 5 Glendale, AZ 85308 Office: (602) 509-0955 Tucson Location: 2 East Congress St., Suite #900-6A Tucson, AZ 85701 Office: (520) 441-1450 Avondale Location: 12725 W. Indian School Rd., Ste E, #101 Avondale, AZ 85392 Office: (623) 469-6603 The post Will Filing for Bankruptcy Allow Me to Keep My Car? appeared first on My AZ Lawyers.

Will Filing for Bankruptcy Allow Me to Keep My Car? Your car is likely one of the most valuable things you own. Not only is likely worth more money than any item you own besides your house, but it also serves a highly valuable role, helping you get to work, the doctor, and other places you need to go quickly. Without a car, you likely wouldn’t be able to work, and you’d have a very hard time caring for your children or even tending to your own needs. Many ask, Bankruptcy Allow Me to Keep My Car? Understandably, one of the first things people are worried about when they consider filing for bankruptcy is whether they will get to keep their car. (Worrying about keeping their house, if they have one, is usually the first concern.) You’ll need to talk to a Gilbert bankruptcy attorney about your particular circumstances to know for certain how bankruptcy can impact your vehicle. However, in most cases, you can expect to be able to keep your car. Chapter 7 Bankruptcy You have to pass a means test in order to qualify to file for Chapter 7 bankruptcy in Mesa. You have to show that your income falls under a certain threshold and that you don’t have assets that are worth more than a certain amount. Also, under Chapter 7 bankruptcy, you can exempt some of your assets from the bankruptcy trustee if they fall under a certain value. In Arizona, your vehicle is exempt from bankruptcy proceedings if the equity is less than $5,000 (if you are filing on your own). If you have a car that’s currently valued at $15,000, yet you still owe $13,000 on it, your equity is only $2,000, and the car is exempt under Chapter 7 bankruptcy rules. You will be able to keep that car. The exemption is $10,000 if you are disabled or you are married ($5,000 each for two vehicles or $10,000 for one vehicle). If your car has more equity than the exemption, the bankruptcy trustee has the right to seize it and sell it to satisfy your debts. However, that doesn’t mean that’s what will happen. The trustee can also abandon the property, deciding that it’s not worth the effort to sell it, and you will be allowed to keep the car. Because your car is a secured debt, you cannot discharge what you owe in bankruptcy. So, if you have fallen behind in payments or you have decided that you don’t want to pay on the car anymore, the only option is to let the lender repossess the vehicle. You cannot discharge the debt and keep driving the car. Chapter 13 Bankruptcy A Mesa Chapter 13 bankruptcy filing reorganizes your debt so that it is more affordable. If you own your vehicle outright, it should be unaffected by a Chapter 13 filing. However, if you are still paying toward your vehicle, it can be included in your repayment plan – and that may result in you paying less for the vehicle. For example, say your vehicle is valued at $10,000, yet you still owe $13,000 on it, only that $10,000 is considered secured debt. The remaining $3,000 will be rolled into the finance plan for your unsecured debt. By the end of your repayment plan, if any of that balance is left, it is discharged.  Therefore, chapter 13 Bankruptcy Allow Me to Keep My Car. Leased Vehicles Typically, you would continue to pay your lease and drive your vehicle after you file for bankruptcy. Under a Chapter 7 filing in Mesa, you have to file a “Statement of Intention for Individuals Filing under Chapter 7” within 30 days to declare your desire to continue leasing the vehicle. Failure to do so could result in your vehicle being repossessed. Declaring your intent to keep the vehicle means that you continue to make payments, as well as any extra charges for going over mileage or for damages. If you want to keep leasing your vehicle under a Mesa Chapter 13 filing, you need to discuss it with your bankruptcy attorney as the rules are bit trickier. However, you should be able to continue leasing. Filing for bankruptcy often allows you to get maximum debt relief without stripping you of the few assets you may have. However, every case is unique, so it is important that you meet with an experienced bankruptcy attorney serving Glendale who can review your financial details and give you a clear picture of how bankruptcy can help (or how it may have a potentially negative impact in the case of assets). Call My AZ Lawyers today to talk with a bankruptcy attorney about your options for debt relief. We help clients with both Chapter 7 bankruptcy and Chapter 13 bankruptcy. Our goal is to maximize your debt relief while also helping you keep as many of your assets as possible. We serve clients throughout the Phoenix area, including in Mesa, Glendale, and Tucson. Call us today to speak with a dedicated bankruptcy lawyer. Arizona Offices: Mesa Location: 1731 West Baseline Rd., Suite #100 Mesa, AZ 85202 Office: (480) 448-9800 Email: [email protected] Website: http://myazlawyers.com/ Glendale Location: 20325 N 51st Avenue Suite #134, Building 5 Glendale, AZ 85308 Office: (602) 509-0955 Tucson Location: 2 East Congress St., Suite #900-6A Tucson, AZ 85701 Office: (520) 441-1450 Avondale Location: 12725 W. Indian School Rd., Ste E, #101 Avondale, AZ 85392 Office: (623) 469-6603 The post Will Filing for Bankruptcy Allow Me to Keep My Car? appeared first on My AZ Lawyers.

Lawyer to Help You Discharge Medical Bills in Bankruptcy Wondering what to do about medical debt? You’ve probably heard that medical bills are the kind of unsecured debt that can be discharged in a bankruptcy case. This is true. However, there are three important considerations to keep in mind when deciding to file a bankruptcy case to discharge medical debt. The point of filing bankruptcy is to get a fresh start. What kind of fresh start has you searching for new medical providers, or dealing with post-petition debts that are not discharged, or having a lien placed on your house that you must satisfy if you sell or refinance? Medical bankruptcies are very common, unfortunately. If you are dealing with medical debt you cannot pay, contact us to schedule a consultation. We will help you time your bankruptcy filing to get the maximum amount of medical debt discharged. Using careful strategy and forethought to plan the timing of your filing will get the best result possible for you.  We have been able to save people tens of thousands of dollars with proper planning, that would otherwise been owed to medical providers. #1 – If you have just fallen ill or just had surgery, you may want to wait to discharge medical bills in bankruptcy. Why? Because if you file too soon, you risk failing to capture medical bills that are incurred after the date you file. Post-petition medical bills are not discharged, and you will still be responsible for paying them. Talk with your medical providers to find out what treatment, therapies, or medications you will likely need in the short term and in the long term. This will be valuable information in determining when to file your bankruptcy case.  People with medical debt rarely file bankruptcy right away for this reason. However… #2 – If you are being sued over medical debt, you may want to file bankruptcy sooner rather than later. Doctors rarely sue their patients. It is more likely that your debt will be sold to a medical bill collection agency, which will hound you day in night with letters, phone calls, and threats. After a few months of this the agency may sue you. If you fail to defend in a medical bill collection lawsuit, or you defend and lose to the plaintiff debt collector or creditor, the court will enter a money judgment against you. The plaintiff can then levy your bank accounts or other property, or the plaintiff may choose to file a state-wide lien on your real property. This means that if you refinance or sell you home, that debt must be paid. If debt collectors are harassing you over medical debt, or if you have been sued by a medical bill collector or medical provider, contact us. We can discuss the timing of a bankruptcy petition so that the debt collector does not have time to file a lien on your property or seize any of your money. What to do if You Face Ongoing Medical Expenses and a Medical Debt Lawsuit at the Same Time If you are not done with treatment and know that you will face more medical bills in the future, yet you are being sued or threatened with a lawsuit over medical debt, call us. We will help you weigh your options and decide the best timing of your filing. #3 – If you like your doctors and require continuing care, you may want to pay them.  It is possible that if you file bankruptcy and get your doctor’s bills discharged, that doctor will decline to see you again. If you want to keep this doctor, know that it is not permissible to take that debt out of your bankruptcy filing and continue to pay it while getting your other debts discharged. This is called “preferential treatment” of one creditor over another, and many a Trustee and creditor has objected to discharge on this basis. To do this right, we must include all of your medical and other unsecured debts in your bankruptcy filing and get them discharged. However, there is no law in the Bankruptcy Code forbidding you from paying back a discharged debt after the bankruptcy is over. Know that this is an option for you if this situation applies. Speak with an Experienced Bankruptcy Lawyer in Philadelphia about Clearing Your Medical Debt As you’ve read, two or all three of these considerations can compete for priority in any individual case, and it can be a challenge to figure out what is best to do. File now? Wait to file? Don’t file at all? We will help you decide. Give us a call at 215-515-5046 to schedule your free, no-obligation consultation. We will take a look at your overall financial situation as well as your past and continuing medical status, and help you determine what course of action is best for you. We will help you get that fresh start. The post Can I Eliminate Medical Bills in Bankruptcy? appeared first on David M. Offen, Attorney at Law.

The country may be shut down for business right now, but it’s business as usual for many credit card lenders. They want their money back plus interest, and most don’t care that you’ve been laid off or your hours have been reduced and you can’t afford to pay right now. While some lenders are offering various forms of assistance during the coronavirus pandemic, others are collecting on money judgments by garnishing wages or levying on bank accounts. Some are in ongoing collection lawsuits against their customers or threatening to sue their customers. If your credit card lender is not offering assistance and you can’t afford to pay, we are here to help, whether through debt settlement, Chapter 7 bankruptcy, or Chapter 13 bankruptcy. It’s not your fault that the economy is at a standstill and you are struggling to pay your bills. Don’t be a financial victim of COVID-19. Call us at 215-515-5869 to talk about your options.  Why Should I Worry About Credit Card Debt Now? Your Credit Card Lender May Cancel Your Card or Reduce Your Credit to Prevent Abuse During the recent recession, credit card lenders pulled back by lowering credit lines or canceling cards entirely to minimize the risk of default. It is likely the same will happen sooner or later as our economy suffers during the nation-wide lockdown. You May Need Cash as the Coronavirus Emergency Continues If the country is basically shut down for the next few months to stop the spread of COVID-19, you may need cash on hand, especially if your credit is reduced or canceled altogether. Money that you would otherwise use to pay your monthly credit card payment will be needed for the bare necessities like food, rent or mortgage, and utilities. Even if your credit card lender is offering some type of assistance or forbearance, you should have cash on hand to spend on necessities. That way, you don’t need to use your credit card, and your credit card balances don’t continue to grow.  Some Credit Card Lenders are Offering Relief Many credit card lenders, including Capital One, Chase, Citi, U.S. Bank, and Wells Fargo, have released statements on their websites announcing that they are offering assistance for their customers during the COVID-19 outbreak. Such help may include: Changing Your Payments Due Date Allowing You to Skip a Payment or Two Payments Lowering Your Interest Rate Forbearing to Collect on Defaulted Debt Visit your lender’s website or call them to find out what help is available to you. Managing Other Debt During the Coronavirus Outbreak If you’ve lost your job due to the pandemic and can’t pay all of your bills, managing your finances will be a balancing act. You must decide which bills to pay. Some of your creditors are offering assistance, and others will demand payment as usual. You must allocate funds thoughtfully to avoid the consequences of default and to ensure that your basic needs are met in this challenging time. Student Loans The federal Coronavirus Aid, Relief, and Economic Security Act (CARES Act) passed on March 27, 2020 provides for a six-month interest-free forbearance on all federal student loan payments and stops wage garnishments for student loan default. The six-month forbearance does not apply to Perkins loans, FFEL loans, or private loans, so if you have those loans, you must continue to pay unless your lender or servicer is offering relief. Contact them to find out. Also, keep in mind that the CARES Act does not provide any student loan forgiveness. You’ll have to resume payments after September 30, 2020 unless further legislation is passed. Mortgages Federal mortgage lending companies Freddie Mac and Fannie Mae offer payment forbearance for up to 12 months. There are also private lenders granting forbearance for up to 120 days. Contact your lender to find out if you can defer payments. If you are already in foreclosure, contact a mortgage foreclosure attorney in Philadelphia. While tax sales and sheriff sales are temporarily postponed in many communities, inevitably they will happen. Let us help you keep your home. Auto Loans – Can You Defer a Payment? Perhaps. If you’ve lost your job or your work hours have been reduced due to the pandemic, call your lender to explain and ask for help with your car payments. For example, Ally Bank is deferring monthly auto loan payments for up to 120 days. Hyundai Finance is deferring payments for up to three months. Call your lender to explore your options. Memberships and Subscriptions Perhaps this occurred to you already, but if you have a gym membership, or a subscription to a concert series, or season tickets to sports events or an amusement park, you can cancel these because you won’t be going anytime soon.  Contact Your Credit Card Lender for Help If your lender is not listed about and there is no information about any form of assistance on their website, call them to ask for help. Your lender will likely want to work with you to keep you as a paying customer in whatever way is possible for you. It is much less expensive for your lender to allow you to skip a payment or two than to sue you. Right now there is no credit card debt forgiveness being offered by lenders or being mandated by the government. This may change as the pandemic continues to affect the economy. What to Do if Your Credit Card Company Sues You Do NOT ignore it! If you fail to respond to a credit card debt lawsuit, you let your lender win by default! If you get notice in the mail or are served personally with lawsuit papers, look at them carefully. The court gives you a period of time in which you can respond and defend, and there will be instructions on how to do so. If you’ve already ignored a lawsuit, it hasn’t gone away – your credit card lender will get a judgment against you and take efforts to collect. Call us or email us sooner rather than later to prevent a judgment against you, wage garnishment, levy on bank accounts, or a lien on your property. We can help you get a fresh start, even during the pandemic. The post What to Do About Credit Card Debt During the Coronavirus Pandemic appeared first on David M. Offen, Attorney at Law.

April 29, 2020From: JD SupraBy: Kathleen Muthig; Haynsworth Sinkler Boyd, P.A.As the COVID-19 pandemic marches on, more homeowners than ever are seeking assistance from their lenders. The American Bankruptcy Institute reported on April 24, 2020 that over 3.4 million homeowners have entered into COVID-19 related mortgage forbearance plans. This is a significant increase since April 3, 2020, when just over one million homeowners were utilizing COVID-19 related mortgage forbearance plans. Undoubtedly, COVID-19 and the resulting Coronavirus Aid, Relief and Economic Security (CARES) Act have changed the landscape of consumer bankruptcy cases, especially with regard to the treatment of mortgage debt. Below are 10 changes that Creditors should be aware of in Chapter 13 and Chapter 7 cases.1. COVID-19 relief payments are excluded from definition of “income.” Payments made under federal law related to COVID-19 are excluded from the disposable income requirement of confirmation in the Bankruptcy Code and the income calculation for eligibility under Chapter 7.2. Chapter 13 plans may exceed five years. If the Debtor is experiencing hardship due to COVID-19, then a Chapter 13 Plan confirmed before March 27, 2020, may be modified to extend the repayment period up to seven years after the first payment was due under the Chapter 13 Plan after confirmation. Under the Bankruptcy Code, Chapter 13 Plans are limited to a length of five years. If a plan is modified from five years to seven years, and a Creditor’s arrearage is paid over those seven years, the Creditor will receive less monthly arrearage payments in the modified plan than under the original confirmed plan.3. Second Moratoriums. Some Chapter 13 Trustees have agreed to consent to second moratoriums and longer time periods in order to bring cases current, even without the existence of a qualifying hardship under the CARES Act provisions.4. Practical changes to Bankruptcy Court procedures.U.S. Bankruptcy Court for the District of South Carolina Judges Duncan and Waites entered an Operating Order 20-08 setting forth procedures in light of COVID-19. The Order includes a requirement for Debtors to make all mortgage payments to the Trustee on claims secured by a first priority security interest in the Debtor’s principal residence. Chapter 13 Plans in which mortgage payments are paid to the Trustee, instead of directly to the Debtor, are called “Conduit Plans.”5. Payment deferments due to COVID-19 in conduit plans. Chapter 13 Creditors will need to work with the Chapter 13 Trustees and the Debtors to agree upon and seek Court approval for modifications to the Plan due to COVID-19. Creditors should be mindful to file a timely Notice of Payment Change if the loan payments due are modified under Bankruptcy Rule 3002.1.6. Payment deferments due to COVID-19 in plans where Debtor is paying mortgage payments directly to the Creditor. Chapter 13 Creditors will need to work directly with Debtors to agree upon a loan modification, forbearance, or deferment. Again, Creditors must file a timely Notice of Payment Change pursuant to Rule 3002.1.7. CARES Act foreclosure relief for federally-backed loans. A servicer of a federally-backed loan may not initiate any foreclosure process, move for a foreclosure judgment, order a sale, or execute a foreclosure-related eviction or foreclosure sale for sixty days from March 18, 2020. Note that this stay is separate from any state-mandated stay of foreclosures, like the one currently in place that prohibits foreclosures until May 1, 2020, in South Carolina.8. CARES Act forbearances. Borrowers with federally-backed mortgage loans can request a forbearance from mortgage payments for up to 180 days if they have been affected by COVID-19. The Act also provides for separate forbearance rights for owners of multi-family property (five or more units) and provides protection for tenants from eviction if the owner applies for a forbearance.9. CARES Act eviction relief. A Landlord of a “covered dwelling” may not file an action for eviction or charge additional fees for nonpayment of rent during a 120-day period beginning on March 27, 2020. A covered dwelling is one where the building is secured by a federally-backed mortgage loan or one that participates in certain federal housing programs. Note that this stay is separate from any state-mandated stay of evictions, like the one currently in place that prohibits evictions until May 1, 2020, in South Carolina.10. CARES Act student loan relief. For covered student loans, the CARES Act suspends payments and waives interest from March 13, 2020, through September 30, 2020. Many Chapter 13 Plans provide for the Debtor making student loan payments outside the Plan, so the CARES Act relief is vital to Chapter 13 Debtors, because a moratorium or deferment in the Plan would not affect those payments owed outside of the Plan.

When Does a Small Business File for Bankruptcy? And 8 More QuestionsThe coronavirus is expected to permanently shut millions of small businesses in the next several months. Here are issues for owners to consider.Jerry Stetina, chief operating officer of A to Z Total Heating and Cooling outside Detroit. The firm filed for bankruptcy protection under a new law for small businesses.Jerry Stetina, chief operating officer of A to Z Total Heating and Cooling outside Detroit. The firm filed for bankruptcy protection under a new law for small businesses.Credit...Sylvia Jarrus forThe New York TimesBy Amy HaimerlMay 1, 2020, 5:00 a.m. ET All the forecasts point in the same direction: A wave of small-business bankruptcies is coming.More than 40 percent of the nation’s 30 million small businesses could close permanently in the next six months because of the coronavirus pandemic, according to a poll by the U.S. Chamber of Commerce.“It’s a crisis that will impact our economy for generations,” said Amanda Ballantyne, executive director of Main Street Alliance, an advocacy group for small business. “We’re going to lose so much of the small-business sector.”Commercial bankruptcies in the first quarter of 2020 ticked up 4 percent from a year earlier, according to data from the American Bankruptcy Institute. But many of those filings were made before the pandemic, when the economy was healthy. Right now, some owners are waiting to find out if they will receive federal stimulus aid before deciding whether to file for bankruptcy protection.Many of them may just disappear. But for others, a bankruptcy law that took effect in February, the Small Business Restructuring Act, could help them survive the pandemic.Before that law, if a struggling small business wanted to restructure its debt, its only option was Chapter 11, which is the commercial bankruptcy code. It allows a company to negotiate with creditors for better terms — a process known as debt restructuring — and in some cases dismiss debt. The goal is for the company to get a fresh start.But the Chapter 11 process is long and expensive, and a recent report by the Brookings Institution found that it is better suited to large firms. The new rules, known as Subchapter 5 because they are part of Chapter 11, give firms with less than $2.73 million in debt the power of reorganization with a few key simplifications. Two main changes: A judge can enforce a restructuring plan even if creditors don’t like it, and the owner can continue running the business.Congress recognized that this tool could be a lifeline to small businesses trying to get through an economic shutdown. So as part of the federal stimulus program, it expanded eligibility to firms with up to $7.5 million in debt. That change means Subchapter 5 could help up to 70 percent of all businesses that might file for bankruptcy, Brookings estimated.“A number of small businesses who are prone to just giving up could be saved,” said Bob Keach, who leads the bankruptcy practice at Bernstein, Shur, Sawyer & Nelson, a law firm in Maine.A to Z Total Heating and Cooling in suburban Detroit was one of the first companies in the country to file for bankruptcy protection under the new rules. The family-owned firm has been operating for nearly four decades, but business really took off in the past few years. The company struggled to manage the growth.Its primary problem? Labor. The company’s two dozen employees weren’t enough to keep up with demand, and Jerry Stetina, A to Z’s chief operating officer, said it couldn’t find additional workers. That meant the firm got bogged down paying overtime on top of the typical $35 hourly wage — and tapped out cash reserves.Latest Updates: EconomyWall Street tumbles as tech stocks take a hit.Exxon Mobil lost money for the first time in decades.The center of the U.S. oil boom is now the center of its demise.See more updatesUpdated 58m agoMore live coverage: Global U.S. New York“I know it sounds really crazy, but the process of growing put us in the situation we’re in,” he said.Then a mild winter hit Michigan this year, and fewer customers called for new furnaces or repairs. What little work the employees did have was shut down by the coronavirus. But they didn’t want to give up: Mr. Stetina could see a strong summer season; A to Z just needed a bridge to get there.“People will live without heat, but they won’t live without air-conditioning,” he said. “Our phones are ringing now with questions about A.C. start-ups to get ready for summer.” When A to Z exits bankruptcy, the company plans to hire a controller to better handle its finances.ImageA to Z said it had needed a bridge to get to what it expected to be a busy summer season.A to Z said it had needed a bridge to get to what it expected to be a busy summer season.Credit...Sylvia Jarrus for The New York TimesHere are some of the main questions to consider if you are thinking about a bankruptcy filing for your small business.How do I know when to call it quits?Business owners must search their hearts and assess their balance sheets.“The first question to ask is: ‘Do the owners want to keep this going?’” said Kimberly Ross Clayson, whose firm, Clayson, Schneider & Miller in Detroit, advises small-business clients.If your heart isn’t in it, call a lawyer to help you wind down operations. But if you still think your business can become viable, a Chapter 11 bankruptcy might be the right call.Sign up to receive an email when we publish a new story about the coronavirus outbreak.Sign UpInitially, Mr. Stetina of A to Z was scared to call a lawyer. He knew the stigma around bankruptcy and was worried what clients might think even though A to Z planned to restructure, not discharge, debt. Once he did call, he said, he wished he had done it earlier.“A lot of big businesses have been doing it for years, and it’s some of the reason that they are in business still,” Mr. Stetina said.How do I know if restructuring would help?Write a business plan for a post-pandemic business world. How will your business operate? Where will revenue come from? What new expenses — for marketing, infrastructure and more — will you incur to help your business pivot? If you can write a business plan that shows a positive balance sheet after bankruptcy, restructuring might work.“Chapter 11 bankruptcy is designed to fix people’s balance sheets,” Mr. Keach, the Maine lawyer, said. “It allows you to restructure some debt, eliminate other debt. It doesn’t generate revenue for you.”Should I take out a loan or file for bankruptcy?Every business owner’s situation is different. But a general rule is: If you can’t identify enough future revenue to pay off the debt, borrowing may make matters worse. Some business owners no longer have any personal resources to draw on and may not receive federal stimulus funding.“Don’t borrow blindly and say, ‘It will all work out,’” said Ms. Clayson, who is a federal trustee for Subchapter 5 claims. “If you are thinking a credit card is how you will open your doors and bridge yourself to the next stage, then you really need to be thinking about how viable your business is.”If you find yourself considering nonbank lenders with high interest rates, it’s time to call a lawyer, she said.Do I have to file for bankruptcy to close my business?No. If you can pay off your creditors or negotiate a deal with them, you don’t need to file for bankruptcy protection. But you will want a lawyer to draft agreements.Also: Don’t forget about withholding taxes. When times are tight, many small-business owners who manage their own payroll dip into that pot of money they set aside at each pay period and use it for other expenses.“If you have unpaid withholding taxes, the business owner becomes personally liable,” Ms. Clayson said.Should I file for Chapter 7 or Chapter 11?Think of Chapter 7 as a funeral and Chapter 11 as a do-over.Chapter 7 is used for both individual and business bankruptcies when the goal is to wipe out debt. The debt can go away, but you may also lose your assets.If you wanted to restructure your business debt, you would consider a Chapter 11 bankruptcy and, more specifically, Subchapter 5 for small businesses. But you can always try to negotiate with creditors outside of a formal bankruptcy.“The only reason you need to use Chapter 11 at all is to deal with recalcitrant creditors,” Mr. Keach said. “If creditors won’t negotiate with you, bankruptcy allows you to cram down a plan of restructuring.”There are other forms of bankruptcy filing: One, Chapter 13, is used for personal reorganizations, when you want to try to keep your assets and renegotiate the terms of your debt. Another, Chapter 12, oversees businesses in farming and fishing.Will I lose everything in bankruptcy?It depends on what personal guarantees you made. Most small-business owners put up their home or some other asset as collateral for start-up loans. In fact, the Small Business Administration requires that as part of its non-Covid-related lending.If you used your house as collateral, it’s possible you would be forced to sell it as part of a Chapter 7 settlement. Under Chapter 11, you may have more luck.Must I file both personal bankruptcy and business bankruptcy?Possibly, but not necessarily. It depends on whether you are closing the business or trying to restructure, and what liabilities you have.If you are trying to restructure, the goal is for your lawyer to negotiate with your creditors and create a plan that lets you avoid a personal bankruptcy. But if the creditors don’t like the deal, they could come after you for any debts you personally guaranteed. In that case, you might be forced to file for personal bankruptcy.How does the new Subchapter 5 work?Here is the main thing to know: Like all bankruptcies, it has a magic power called the “automatic stay.” Filing for bankruptcy stops creditors from collecting from you.“It buys you time,” Mr. Keach said.And time is everything. For example, take a restaurant that was having its best year before the pandemic, but then its revenue disappeared. A Subchapter 5 bankruptcy could help the company by halting creditor collections and allowing owners to renegotiate terms.“What it might allow is, with a couple of exceptions, a built-in moratorium on rent,” Mr. Keach said. “You could propose a plan where you could literally not pay anything toward old debt for four to six months as long as your projections show that you have positive projected income after that.”In exchange, business owners will need to use their net operating income — what’s left after the usual expenses like rent, payroll, cost of goods — to pay creditors for the next three to five years.Can I ever open another business?Yes. Securing funding may be more challenging, but it’s not impossible.“My favorite clients have always been those who are already on to their next idea,” Ms. Clayson said. “This is the American way. You can start over. This isn’t a black mark.”

Published: April 28, 2020From: Overton County NewsThe Trump Administration has put a timely halt on the ability of the government to garnish Social Security benefits to pay for defaulted student loans for an indefinite period during the COVID crisis, reports Association of Mature American Citizens [AMAC].Seniors are the fastest growing segment of the population with outstanding student loan debt. Research conducted by Consumer Financial Protection Bureau [CFPB] shows that, “In 2018, Americans over the age of 50 owed more than $260 billion in student debt, up from $36 billion in 2004, according to the Federal Reserve. Nearly 40% of borrowers aged 65 and older are in default.”Bob Carlstrom, president of AMAC Action initiative, said, “Forty-five percent of unmarried Social Security recipients and 21% of married couples rely on their benefits for at least 90% of their income. Garnishing that fixed income for student loan debt can have a particularly devastating impact on their lives.”In a statement issued Wednesday, March 25, Carlstrom expressed AMAC’s appreciation for the decision to suspend the garnishment of Social Security benefits.“We commend the administration and the Secretary of Education for suspending the ability of the federal government to garnish the Social Security income of beneficiaries for payment of student debt during this challenging time,” Carlstrom stated. “The Secretary has indeed responded to the concerns and pleas of many members – and non-members – of AMAC. This action is a good first step on this issue.”Social Security benefits are off limits to nearly all creditors, but not the federal government, which can garnish Social Security benefits for certain debts, including federal student loan debt cosigned by retirees.According to the Federal Reserve, Americans over 50 hold $260 billion in student loan debt. Benefits can be garnished for court-ordered child support or alimony, or for debts owed to the government. For many seniors, however, their monthly Social Security check is both a critical part of, and indeed the safety net, of their income and financial situation.“We believe Social Security benefits should be protected permanently from student loan default garnishment by any party, including the federal government,” Carlstrom said.