The CARES Act, or the Coronavirus Aid, Relief, and Economic Security Act, was passed on March 27, 2020 to provide assistance to those affected by the novel coronavirus. This act provides economic assistance for families, American workers and small businesses, as well as preserves jobs in many American industries. However, with the passing of this act comes changes in consumer bankruptcy filings. Here, the Baltimore bankruptcy attorneys at Grossbart, Portney & Rosenberg, P.A. discuss how the CARES Act has impacted consumers in bankruptcy, and how to seek qualified legal counsel to help guide you through the process.
The CARES Act Modified Definition of Income for Consumers
One large change to consumer bankruptcy after the passing of the CARES Act is the definition of what is considered income. Previously, individuals who were already in the midst of bankruptcy were required to report all of their income. This income was then directed toward monthly debt repayment plans. After the passing of the CARES Act, compensation received from federal and state emergency funds are not considered income, and will therefore not affect your current payments. Additionally, any stimulus checks or increase in unemployment funds are not considered disposable income, and will also not affect your current repayment plan. Because these funds are considered for use under extenuating circumstances, individuals who are currently in bankruptcy or file during the coronavirus pandemic will have adjustments to their filing status and repayment plan in order to preserve their financial wellbeing.
The CARES Act Provides Consumer Protection for Student Loans & Foreclosure
In addition to adjusting the definition of income, the CARES Act provides many consumer protections including assistance in relation to foreclosure proceedings and student loan repayment. With the newly enacted CARES Act, certain student loan programs will suspend payments and waive interest from March 2020 through September 2020. This will help individuals with substantial student loans under bankruptcy maintain a minimal standard of living, and provide time for them to create a request to have their loans discharged if needed. In relation to foreclosure, the CARES Act provides relief for individuals with federally backed loans. In a Chapter 7 bankruptcy case, creditors can file a motion for relief from automatic stay, meaning they are trying to continue the process of foreclosure on your home during your bankruptcy period after you requested an automatic stay. The CARES Act will assist these individuals by preventing creditors from moving forward with the foreclosure process if they have a federally-backed loan and have suffered from a COVID-19 related hardship.
The CARES Act Expands Chapter 13 Repayment Plans
Chapter 13 bankruptcy generally extends longer than Chapter 7, giving individuals time to catch up on finances and establish a comprehensive repayment plan. Under Chapter 13 bankruptcy, a payment plan is usually made between three to five years, locking in a payment plan for debtors. Under the CARES Act, individuals who have suffered as a result of the coronavirus pandemic can apply for an extension of their repayment plan to seven years, reducing monthly payments and providing a sense of financial relief for many. It is important to note that all bankruptcy-related provisions will be available until one year after the CARES Act was enacted, ending on March 27, 2021. The coronavirus pandemic has caused thousands of individuals to lose their jobs and other forms of income, making repayment to their creditors exponentially more difficult. The CARES Act was put in place to provide relief for these individuals during a time in which they may have no other outlet for financial stability.
Consult With Bankruptcy Attorneys at Grossbart, Portney & Rosenberg, P.A. Today
At Grossbart, Portney & Rosenberg, P.A., we understand that the bankruptcy process can feel confusing and overwhelming. In the midst of the novel coronavirus, financial instability and job loss are at an all time high, and individuals in the midst of bankruptcy may feel as if they have nowhere to turn. Our team of qualified bankruptcy attorneys will work with you to provide a comprehensive overview of the CARES Act as it relates to your specific financial situation, and help establish a plan to repay your debts as easily as possible. To learn more about how our team of bankruptcy attorneys can assist you, contact our Baltimore office today.