COVID-19 and Bankruptcy Cases in Florida- Part 4 of my series on the CARES Act and how it may help.
Changes in Bankruptcy
1. Income. For all debtors in Melbourne, Rockledge, Viera, Suntree and all of Brevard County, Florida, the CARES Act excludes stimulus checks and other COVID-19 related payments from being considered as income for purposes of the chapter 7 means test. It also excludes the stimulus checks for being used to determine the amount to pay unsecured creditors in Chapter 13 cases. These payments are excluded from “currently monthly income” under the Bankruptcy Code and also as “disposable income”. This allows debtors in bankruptcy cases to keep stimulus payments and not have them used to pay creditors or deny bankruptcy relief. This provision applies to any case filed before or after enactment of the CARES Act.
2. Tax Refund Checks in Chapter 13 cases. In addition, more good news for Brevard County Chapter 13 debtors from the Chapter 13 Trustee for the Middle District of Florida, Orlando Division (which includes all of Brevard County), Laurie Weatherford, if you have had a hardship due to COVID-19, a debtor can request that their tax refund be used to pay their Chapter 13 plan payments. The debtor's attorney, or the debtor, must complete the necessary request forms and attach proof of the hardship.
3. Extending a Chapter 13 plan if you are facing hardship: The CARES Act also provides that current chapter 13 cases (cases that were confirmed before March 27, 2020) may seek to extend the term of their plans in order to have additional time to pay their debts in the plan. As we all know, many debtors are going to loose their jobs or take reductions in pay. As a result, they may not be able to stay current with plan payments. While courts may suspend 2- 3 payments during this crisis, the existing law would not have permitted debtors to extend their plans beyond a term of five years. If plans could not be extended, many debtors would not be able to cure mortgage defaults, pay car loans and other secured debt, or pay priority claims such as tax obligations and child support. The CARES Act gives debtors with a material financial hardship, directly or indirectly as a result of the COVID-19 pandemic, the right to file a Motion to Modify their payment plan to extend the payment period for up to 7 years after the date the first payment was due after plan confirmation. Some debtors may want to take the least amount of time on any extension because of the effect on non dischargeable debt, like mortgage payments. You should call your lawyer to discuss this in more detail as every case is unique.
The provisions above will end one year after enactment.
If you have any questions about bankruptcy during and after the COVID-19 crisis, please call me at (321) 690-2363 or email us at advocates@cortazzolaw.com
Thank you to the Academy for Consumer Bankruptcy Education for some of the general information in this blog.
