Bankruptcy and COVID-19
The COVID-19 (coronavirus) pandemic has damaged the economy, leaving many families and business owners worried about how they’ll pay for even the most basic expenses. In the midst of this crisis, you might be considering filing for personal bankruptcy, researching how bankruptcy would affect your business, or wondering how COVID-19 will affect an existing bankruptcy filing.
No matter your situation, Sasser Law Firm is here to help give you the answers and assistance that you need. Our board-certified bankruptcy specialist attorneys have extensive experience handling all types of bankruptcy cases for both businesses and individuals. We know how to tackle even the toughest Chapters 7, 11, and 13 cases. That includes emergency situations, like if you’re facing foreclosure and repossession. We also have what it takes to fight through appeals if necessary.
At Sasser Law Firm, we are committed to providing you with the legal services you need relative to a bankruptcy filing. You’ll work directly with our experienced bankruptcy attorneys and experienced staff. Throughout the process, we’ll provide you with the personalized attention and respect you deserve.
To get started, contact us online or call us to set up a free and confidential consultation. We are equipped to consult with you without meeting in person.
What You Need to Know About the Small Business Reorganization Act (CARES Act)
Under the Coronavirus Aid, Relief and Economic Security Act (CARES Act), the U.S. government is providing a $2 trillion package to aid individuals and businesses impacted by the coronavirus crisis.
Under the act, the government will give many Americans one-time payments of up to $1,200 for individuals and as much as $500 for each of the eligible individual’s dependent children. In addition, the act broadens the definitions of who is eligible to receive unemployment benefits to include self-employed workers like freelancers and contractors.
It also provides for $600 per week from the federal government in addition to whatever unemployment assistance an individual gets from their state. The aid package for small businesses includes loans and grants meant to help them cover expenses like employees’ salaries, rent, utilities, and mortgage interest.
In addition, the CARES Act provides for revisions to the U.S. Bankruptcy Code for small businesses and individuals.
Through a revision of the bankruptcy process under the Small Business Reorganization Act of 2019 (SBRA), the CARES Act temporarily raises the debt threshold for small businesses eligible to file for bankruptcy to $7.5 million. This means that for the next year, small businesses with debts that are less than this debt threshold and are at least 50% commercial debts can file for Chapter 11 bankruptcy under Subchapter V of the U.S. Bankruptcy Code.
The amendment relieves some of the financial challenges of filing because businesses that file under Subchapter V will not have to pay quarterly fees, plus the debtor can stretch out their payments of administrative expense claims.
Additionally, this provision is also meant to speed up and simplify the process, so small businesses can get relief as soon as possible. To minimize disputes and distractions in these SBRA cases, creditor committees typically won’t be appointed, only the debtor can file a plan of reorganization, and the court can confirm a plan even if all creditors reject the plan.
The CARES Act also temporarily amends provisions of Chapter 7 and Chapter 13 cases for one year to help individual debtors. Individuals don’t have to include coronavirus-related payments from the government in their list of “current monthly income” when determining eligibility for Chapter 7 or Chapter 13 bankruptcy or in their “disposable income” for a Chapter 13 plan confirmation.
Additionally, individual debtors that have filed for Chapter 13 and have existing confirmed plans can seek extended modifications of their plan if they are experiencing a hardship due to the COVID-19 pandemic.
Tips for Small Business Owners Affected by the Coronavirus Pandemic
In the midst of this challenging time, there are some things that small business owners can do to protect their rights and help prepare for the best possible outcome after the COVID-19 pandemic and lockdown subside:
- Utilize government assistance. Federal and state governments are offering a range of grants and low or no-interest loans to help small businesses stay afloat. In many cases, accepting coronavirus-related assistance can only help your business. Under the legislation, even some of the “loans” don’t have to be repaid as long as you spend the money on qualifying expenses.If your business is struggling, it’s critical to act quickly to take advantage of this funding. These offers are temporary, so if you wait until the pandemic is over to seek assistance, then this kind of funding might not be available to you any longer.
- It’s important to consider what business will look like in the future. Accepting government assistance or taking advantage of special provisions being offered during this crisis might be the best way to protect yourself and the future of your business.
- Maintain perspective on debt. In most cases, businesses are separate legal entities than individual business owners. Because of this, a business creditor may not have recourse against a business owner’s personal assets like their home and/or car unless that business owner signed a personal guarantee with the creditor.
- Consult with a trusted attorney. Respected law firms that focus on helping small businesses have in-depth knowledge of federal, state, and local laws. They can help you understand what legal actions might work best for your business.For example, if you are considering filing for bankruptcy, a reputable attorney can give you personalized information and advice to help you determine whether this is the best choice for you.Additionally, if you choose to file, they can guide and support you through each step of the process and help protect the future health of your business.
- Follow updates on coronavirus-related legislation. The legislative environment is constantly changing in the U.S. as lawmakers rush to support American business owners and reinvigorate the economy. The government is continually discussing new stimulus packages and revisions or temporary changes to laws that might affect your business.
- Follow trusted sources. Such as the Small Business Administration (SBA) website and North Carolina’s state government website for reliable updates on legislation and information on how these changes might affect you.
What to Know About Bankruptcy During COVID-19
Bankruptcy can provide businesses with the relief they need to work towards a healthy future and sometimes even continue operating. However, how the COVID-19 lockdown will affect your situation depends on what stage you’re at in terms of filing for bankruptcy.
Bankruptcy courts are still open to receive electronic filings. Cases are being processed on the same schedule as usual.
If you recently filed for bankruptcy, some 341 hearings and court hearings are being held over the telephone or via video conference.
If you are already in a confirmed Chapter 13 plan, the CARES Act might provide you with the ability to extend out the plan payment if you have been directly impacted by COVID-19. See Sasser Law Firm’s article on Chapter 13 Bankruptcy Plan Payments and COVID-19 for further details.
If you are thinking about filing for bankruptcy, consider consulting with a bankruptcy lawyer before you file. It is still possible to file for bankruptcy during the pandemic, but depending on your circumstances, this may or may not be the best choice for you right now.
For some individuals, relief payments through the government’s CARES Act relief package might be enough to help them avoid filing for bankruptcy. For others, these stimulus payments might give them the money they need to cover fees associated with filing, plus filing for bankruptcy might help provide the relief they need during this trying time.
A bankruptcy filing provides protection from creditor activity immediately upon filing. This court order can automatically halt some of the most traumatic impacts of a financial crisis – like bill collectors calling you constantly, garnishing your wages, and trying to seize your property – so you can get the time you need to make the right choices for your future.
When You Should Contact a Bankruptcy Attorney
Contacting an experienced bankruptcy attorney costs you nothing, plus it can help give you clarity on your legal options and peace of mind to make the best choice for you, your family, and your business.
With Sasser Law Firm, you can trust that we have your best interest in mind. We won’t charge you a fee unless you file for bankruptcy, plus we won’t pressure you to file. You won’t have to worry about getting caught by fine print because we provide you with straightforward information on our fees and how we operate.
Our board-certified bankruptcy specialist lawyers have what it takes to tackle even the toughest cases. We’ve handled over 8,500 cases for businesses and individuals, and we can do the same for you. To set up your free consultation, call us today or contact us online.
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