bankruptcy law changes

Temporary Changes in Bankruptcy Law Due to COVID-19

In March of 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was passed, with a historic $2.2 trillion of economic stimulus aide, to try to offset the social and economic damage inflicted by COVID-19

Along with so many other changes for most of us in recent months, we see that bankruptcy legislation has changed a little, too. What many don’t realize is that the CARES Act temporarily changed federal bankruptcy law. This includes some of the procedural guidelines set forth by Chapter 5 but also on filing allowances for some of the most common types of bankruptcy, like Chapter 7 or Chapter 13. 

What Are The Major Differences Between Chapter 7 and Chapter 13 Bankruptcy?

Chapter 7 bankruptcy frequently applies to eliminating any unsecured debt, like credit card or medical debt. Essentially, it wipes the debt slate clean. It may also involve the liquidation of some of the debtor’s assets to go towards debt repayment. Note, Chapter 7 does not cover all varieties of debt, so it may not be suitable for everyone. Student loans, for example, cannot be eliminated with this type of bankruptcy.

Chapter 13 bankruptcy allows debtors to restructure their debt by making significantly lowered payments for the duration of 3-5 years. It’s not a complete debt elimination, but the reduction in debt allows many to get back on their feet while fulfilling at least some part of their debt obligation. 

Important to both of these kinds of bankruptcies are “monthly income” and the amount of “disposable income” one has on hand.  For many people living through the Coronavirus pandemic, those figures may have changed drastically in the last few months. And, while many may not have previously passed the Means Test in qualifying for bankruptcy, they may now.

Here are some facts you need to know, whether you have already filed for bankruptcy or are considering filing for bankruptcy in the near future:

  • Payments made under federal law to individuals related to the COVID-19 pandemic do not count in Chapter 7 or Chapter 13 bankruptcy filing as “current monthly income” and do not have to be reported as such.
  • Any payments made to individuals relating to the COVID-19 pandemic under federal law do not count in bankruptcy filing as “disposable income” and therefore cannot be included in the debt repayment plan for Chapter 13 bankruptcies. This means that your repayments won’t go up like they would otherwise. 
  • Past filers of Chapter 13 can apply for a modified repayment plan based on any (direct or indirect) hardships experienced due to COVID-19. Your monthly payments could even be greatly reduced by this aspect of the CARES Act.
  • Chapter 13 debtors may also qualify for an extended repayment plan of up to seven years if qualifying under the economic hardship resulting from COVID-19.

Figuring out whether you qualify for bankruptcy or may be eligible for a modified bankruptcy plan is best to ascertain with the help of a qualified bankruptcy attorney to walk you through the process.  At the Law Offices of Bill F. Payne, we can guarantee up-to-date legal information and advice in an ever-changing world.

Contact us today to set up your free initial consultation.

Business Bankruptcy

If your business is currently facing financial difficulties that it cannot handle on its own, it may be time to consult a corporate bankruptcy lawyer. While bankruptcy will have a significant impact on your business, it may be the only way to move forward.

Types of Business Bankruptcy

The three types of bankruptcy available to businesses include:

  • Chapter 7, often used by sole proprietorships and small businesses;
  • Chapter 13, which allows sole proprietorships to restructure their debt; and
  • Chapter 11, used by corporations and partnerships to help meet debt obligations.

When filing business bankruptcy in Dallas, you’ll first need to consult with a business bankruptcy attorney to see whether it’s truly the best option for you. If it is, it will then be important to determine which option best fits your situation.

Filing Chapter 7 Bankruptcy for Your Business

Chapter 7 bankruptcy is for businesses that don’t have the means to restructure their debt. It effectively frees you from most of your unsecured debts, though it may mean liquidating assets to do so. To qualify for Chapter 7, your business will need to pass a “Means Test” to see if its income is insufficient to meet its current obligations.

Chapter 7 bankruptcy is typically best for:

  • Sole proprietorships and general partnerships where individuals are responsible for business debts,
  • Corporations or LLC’s
  • Businesses that can no longer continue operating.

Filing Chapter 13 for Sole Proprietorships

Sole proprietorships that don’t pass the means test may qualify for Chapter 13 bankruptcy. Additionally, general partners of partnerships—not the partnership itself—may qualify to file under this chapter since they are personally liable for their business’s debts.

Chapter 13 allows individuals to pay off their debts over a three to five year period. To qualify, you’ll have to meet these requirements:

  • Be individually responsible for your debt ( if you’re a sole proprietor or general partner),
  • Wish to continue business operations, and
  • Have no more than $419,275 in unsecured debt and $1,257,850 in secured debts.*

Note that corporations, LLCs, LLPs, and other such organizations cannot file Chapter 13 bankruptcy.

*Debt limits are current as of April 2019.

Filing Chapter 11 for Partnerships and Corporations

Partnerships and corporations that wish to restructure their debts may file for Chapter 11 bankruptcy. The process of doing so is long and complex, and you will need a corporate bankruptcy lawyer to work with you through the process, including filing petitions and creating a repayment plan.

Get Started with a Business Bankruptcy Attorney

If you think you may need to file business bankruptcy in Dallas and other areas in North Texas, we can help you through that process. We’ll advise you on the steps you’ll need to take as well as which type of bankruptcy is right for your situation. To get started, contact the Law Offices of Bill F. Payne, P.C. today.

How to File for Bankruptcy

If you have overwhelming debt or financial obligations, it may be time to file bankruptcy. If you’re not sure how to file for bankruptcy or whether it’s right for you, a personal bankruptcy lawyer can help you.

When to Consider Bankruptcy

Bankruptcy may be your best course of action if you:

  • Have difficulty keeping up with debt payments
  • Can’t seem to pay off debt balances, no matter how hard you try
  • Have lots of high-interest debt
  • Are facing a possible home foreclosure or other loss of personal property

If any of these sound like your situation, talking to a Dallas bankruptcy attorney will be the best place to start. We can help you determine if bankruptcy is right for you.

Choose the Type of Bankruptcy

Before filing bankruptcy, you’ll need to choose the right type for your situation. Consumers have two types of bankruptcy options: Chapter 7 and Chapter 13.

Chapter 7

Chapter 7 bankruptcy is intended to completely eliminate certain unsecured debts, such as credit card debt or medical bills.

Note that getting debts discharged may require liquidating some of your personal assets, and even then, not all types of debt are covered. That said, Chapter 7 can be a powerful way to get a fresh start.

Chapter 13

Chapter 13 bankruptcy allows you to reorganize your debt and make payments over the course of three to five years. The idea is to allow you to get caught up on your financial obligations without outright forgiving the debt entirely.

Do You Qualify for Bankruptcy?

To file for bankruptcy, you’ll first need to meet certain eligibility requirements.

Means Test

To qualify for Chapter 7 bankruptcy, you’ll need to pass a “Means Test,” which will determine if you have the financial means to meet your current obligations. Passing the means test indicates that you can’t make a meaningful impact on your existing debt.

Eligibility

Some situations may limit your eligibility, such as if you have already filed bankruptcy in the past. Typically, you’ll have to wait a period of time or pay enough of your previous obligations in order to qualify if this is the case.

Other requirements

Other situations, such as residence requirements, may also limit your eligibility. The best way to find out if you’re eligible is to talk to a personal bankruptcy lawyer.

Get Started with a Dallas Bankruptcy Attorney

To learn more about how to file for bankruptcy and to get started with the process, you’ll want to contact a Dallas bankruptcy attorney. At your initial consultation, bring the following information:

  • Recent bills from each of your creditors
  • Collection letters
  • Court documents
  • Notices of property repossession, foreclosure, etc.
  • Financial information, including pay stubs and tax documents
  • Proof of ID

At the Law Offices of Bill F. Payne, P.C., we’ll help you determine whether bankruptcy is the best option for you, find out if you’re eligible, and get you started on the process. Contact us to schedule a free consultation.