Corona Virus and the Application of Chapter 7 and Chapter 13 Bankruptcy
It is with much angst that the path forward in this new economy is muddied. With the World Health Organization declaring Covid 19 a pandemic, the United States and world economies have turned on a dime. Many people were on a paycheck to paycheck lifestyle that has allowed them to meet there obligations monthly but not save for an emergency. Unfortunately, the emergency has arrived. We remain optimistic that the Corona Virus emergency will be short lived, and that employment will only be temporarily interrupted. However dim the prospects for employment are there still remains available for individuals both Chapter 7 and Chapter 13 for Bankruptcy protection, as well as mortgage foreclosure defense in the event that the mortgage companies and banks refuse to help in this unprecedented emergency. In the event that you are unemployed for a longer period of time and fall behind on your mortgage for several months there is still the probability that once you become re-employed we will be able to put the past due mortgage payments into a Chapter 13 Plan and catch up the mortgage over the next 36 to 60 months.
The following is a brief summary of the available remedies in the event they are needed.
Chapter 7 bankruptcy is also called liquidation bankruptcy. If you pass the means test, you can get Chapter 7 bankruptcy relief, regardless of how much your debt is. Our Firm can help you determine whether you pass the means test and, if so, whether Chapter 7 is the right strategy for you. In Chapter 7, most often a debtor’s assets are exempt from creditors and the debtor keeps all of their assets. In rare cases some of the debtor’s assets may be used to pay off creditors. The process usually lasts only a matter of months, and debts are discharged. To qualify for Chapter 7, a debtor must have received credit counseling from an approved credit counseling agency in the 180 days before filing for bankruptcy. Our firm handles these matters on a fixed fee basis so there is no worry about an hourly charge for the services provided. We also have available payment plans so that most client’s can proceed if necessary.
Chapter 13 bankruptcy allows debtors who do not pass the means test, and who want to keep their assets, to obtain a discharge by developing and following a debt repayment plan. It begins with filing a petition with the bankruptcy court, along with a schedule of assets and liabilities, a schedule of expenditures and income, a schedule of executory contracts and unexpired leases, and a statement of financial affairs. Our Firm in Framingham can make sure that all of the paperwork is properly filed. You need to propose a repayment plan to make regular payments to creditors for 3-5 years, and the plan must be approved by a bankruptcy trustee. Chapter 13 also allows, and is most commonly used, so that debtor’s can catch up on past due mortgage payments in the plan of repayment and keep their homes. Once a bankruptcy petition is filed, an automatic stay goes into effect. Creditors are not allowed to keep attempting to collect debts. Filing for Chapter 13 bankruptcy may mean that you do not need to give up your property, and there are certain tools, such as lien stripping, that can be used to save your property.
Non-judicial foreclosure is the main method of foreclosure that lenders use. In this type of foreclosure, there is not a formal court action, but there are strict notice requirements. When a lender does not comply with notice requirements, you may be able to challenge the foreclosure in court. You also may be able to work out an alternative to the foreclosure that allows you to keep your home or avoid severe damage to your credit. Depending on the situation, our office might help a homeowner pursue a loan modification or a short sale, file for bankruptcy, obtain an extension, contest a foreclosure, or argue that they are a victim of predatory lending.
If you have any questions regarding a way forward in light of the Corona Virus crisis please feel free to call our office. We are offering a free one hour consultation via telephone so that we can comply with the current social distancing procedures outlined by the CDC.
Finally, please everyone keep yourself and your families safe. We can take care of the economic impacts of this pandemic, if necessary through the means described above, but we cannot take care of the loss of loved ones from the virus.