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“10% off Chapter 7 and 13 bankruptcy filings” - More details

How the coronavirus stimulus bill affects consumer bankruptcy

As the global economy sinks into a coronavirus-fueled recession, millions of Americans are wondering how they will make ends meet. Unemployment rates are skyrocketing. Small businesses are going under left and right. Renters and homeowners alike are scraping to make their next payment.

The recent Coronavirus Aid, Relief and Economic Security Act (CARES Act) offers stimulus checks as a short-term infusion of cash for many desperate households. It also has important implications for consumer bankruptcy.

Changes to bankruptcy rules

Whether you are currently in bankruptcy proceedings or considering filing, here are the key things to know about changes to bankruptcy rules under the CARES Act:

  • The stimulus payments from the federal government won't be treated as income for bankruptcy purposes under either Chapter 7 or 13. This clarification gives people greater leeway in using those checks to address immediate needs without fear of it impacting their bankruptcy cases (present or future).
  • Those with Chapter 13 payment plans can seek a modification. If you're currently under a payment plan pursuant to Chapter 13 bankruptcy, you might be able to get your monthly payments reduced due to pandemic-related financial hardship. Likewise, you may be able to extend the payment plan for up to seven years total (rather than five years).

These changes are good news for debtors - especially those who have lost jobs or other sources of income due to the coronavirus pandemic. They allow debtors to focus on high-priority needs such as saving their homes from foreclosure and satisfying tax debts.

Exploring other options

Additional options for debt relief may also be available during these challenging times, including:

  • Interest-free forbearance on student loans
  • Modifications to auto loans, mobile home loans and other secured debt
  • Deferment on mortgage payments

Of course, much depends on your lender and your unique financial situation. The bottom line is to speak with an attorney if you're suffering financial hardship.

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