Mortgage companies were proceeding against home owners in arrears before we all knew what Social Distancing was, and they will continue after the Coronavirus goes away. However, at least in New Jersey there is a 90 day moratorium on foreclosures. Eventually, the pandemic will pass and the mortgage companies will again want to be brought current or the foreclosures will resume. In that event, there may be several ways of addressing the mortgage arrears. In light of the devastating impact of the Coronavirus, some lenders may be more willing to modify a mortgage or perhaps defer a few of the missed payments rather than modify the whole thing. Bankruptcy will also remain an option. Through a chapter 13 bankruptcy a homeowner can resume their regular mortgage paymewnts and generally compel the mortgage company to accept payments over a period of time, usually five years. So while it may be a struggle to get through the next few months, the good news is homeowners should be able to retain their homes.
Bankruptcy and the Coronavirus
The coronavirus ( COVID 19 ) has had an impact on bankruptcy and the bankruptcy courts just like it has had an impact on all aspects of life. However, bankruptcy remains a viable option to deal with its impact on financial circumstances both during and after the virus is gone. Both the Bankruptcy Courts and some bankruptcy attorneys are adjusting to the crisis. While some hearings are being rescheduled, the Bankruptcy Courts are also currently scheduling telephone or video conferencing instead of in person hearings. Attorneys are adjusting and also offering alternatives. While clients can still come into our offices in Maple Shade, Cherry Hill, Willingboro and Sicklerville New Jersey , we can also schedule telephone meetings or video conferences. In the event an in person meeting is required, for example to review and sign the bankruptcy petition and schedules, our large conference rooms allow for social distancing. If you are having financial issues during the coronavirus outbreak, you should contact an attorney.
Bankruptcy Relief for Family Farmers
The Family Farmer Relief Act of 2019 was recent passed to make bankruptcy more readily available for the struggling family farmers. While a streamlined form of bankruptcy is available in Chapter 12 of the bankruptcy code, it was only available to family farmers with debts of less than 4.4 million. That left a number of struggling farmers with only the option of turning to the more expensive Chapter 11. The Family Farmer Relief Act of 2019 increases that debt limit to 10 million dollars. As a result, more family farms have a greater chance of successfully reorganizing.
BANKRUPTCY HELP FOR VETERANS
The Haven Act of 2019 is intended to help more veterans qualify for Chapter 7 Bankruptcy. Prior to the law change the bankruptcy courts would include Veteran Disability Benefit Payments in the calculation of disposable income even though Social Security Disability payments did not count. With the additional income, it made it more difficult for veterans to qualify for Chapter 7. With the new law our veterans will be better served by bankruptcy. Considering a disproportionate share of veterans are forced to turn to bankruptcy for relief, the new law is a welcome change.
Hospital Bankruptcy Crisis
People from Philadelphia Pennsylvania and its surrounding suburbs, including southern New Jersey are probably aware of the fact that the entities that own Hahnemann University Hospital and St. Christopher's Hospital for Children in Philadelphia filed for Chapter 11 last summer. While the plans were to keep St Christophers open, the plan was to close Hahnemann. What locals may not be aware of is the fact that hospitals from around the country, especially those in poor and rural areas, have also filed bankruptcy. According to a January 9, 2020 article on Bloomberg.com by Lauren Coleman-Lochner and Jeremy Hill, at least 30 hospitals filed bankruptcy in 2019. When a bankruptcy is filed by any business, concerns often relate to the potential job losses and drop in income. However, when the entity filing bankruptcy is a hospital, additional issues including the ability of those patients to get health care is also a cause for concern. Through Chapter 11 bankruptcy, some of the hospitals may be able to reorganize and survive. But for the one's that must close, it is a double tragedy.
Changes in Bankruptcy Preference Laws
When a business files a bankruptcy, under certain circumstances the bankruptcy trustee can assert a preference claim against certain creditors and take back from those creditors money previously paid to the creditor by the debtor. For example, if within 90 days of the filing of a Chapter 11 bankruptcy a payment is made on a past due invoice, in certain circumstances the trustee can assert that the creditor received a preference which is unfair to the other creditors and therefore, even though the money was owed, they must give it back to the debtor so the money can be redistributed to treat creditors equally. Trustee's would take advantage of this power by filing suit in order to try and get a settlement even though there may be valid defenses such as new value or contemporaneous exchange. In addition, if a company in, say Maple Shade NJ files a chapter 11 and the the debtor paid a company in Bozeman, Montana within 90 days before filing, the company in Bozeman could be forced to litigate in New Jersey. Under the new law, a trustee must do reasonable due diligence and consider defenses before they can file a suit. In addition, all lawsuits for less than $25,000.00 must be filed in the District where the defendant business is located. Both changes were badly needed.
Filing bankruptcy gives you a chance to rebuild your credit
To the average American, filing for bankruptcy may seem like a scorched-earth tactic for handling their debts. People might even compare it to a nuclear attack on their finances, leaving nothing behind. While it is true that bankruptcy has a profound impact on your credit in the short term, that doesn't mean that it must have a permanent, negative effect on your life and finances.
In fact, bankruptcy can be the start of better financial decisions and increased physical responsibility. Looking at bankruptcy not as the end of your creditworthiness but as an opportunity to improve your credit over time is one way to make the best of a stressful situation.
The New Small Business Reorganization Act
The new Small Business Reorganization Act was signed into law by President Donald Trump on August 23, 2019 and goes into effect in February 2020. The changes are long over due. Filing a Chapter 11 bankruptcy for a small business has been problematic because it is more designed for a large company rather then a small one. Because of certain rules which could make it more difficult for the owners to retain their ownership in certain circumstances, chapter 11 was sometimes avoided even though it could provide relief. Now the debtor can elect to be treated as a subchapter V debtor as of February 19, 2020. The new Chapter streamlines the process and avoids the potential loss of ownership. It is more cost effective. It also allows the debtor to have his bankruptcy plan confirmed over objections as long as certain criteria are met. Overall it should allow a number of small businesses to successfully reorganize
Don't forget to take post Bankruptcy filing Money Management Course
Don't forget to take post filing Money Management Course. A lot of people filing bankruptcy are aware of the need to take a credit counseling course before they can file bankruptcy. Typically it is taken on line or by telephone. However, you should be aware of the fact that a second course must be taken, this one after the bankruptcy has been filed. If the money management course is not completed and filed with the bankruptcy court prior to the case being closed, your debts will not be discharged. This means you will still owe the debts that existed when the bankruptcy was filed. There are steps that can be taken to rectify the problem, but that takes time and money.
When do you lose assets as part of a bankruptcy filing?
One of the biggest reasons that people give for avoiding or putting off bankruptcy is the potential for the loss of their major assets. Most people only have a cursory understanding of how bankruptcy works, but the idea that the courts will liquidate certain assets is well known. People might imagine the loss of their home, their vehicle or just about everything else.
However, the actual risks to your assets may be less than you might assume. Bankruptcy is there to help people overcome debt and avoid poverty, not to push them into indigence by stripping them of everything they own. There are protections in place that allow you to retain some or all of your assets depending on your income, your assets and the nature of your debts.
