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California Coronavirus (COVID-19) Related Bankruptcy Attorney

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The coronavirus has greatly impacted California residents and businesses. The statewide “shelter-in-place” directives have shut companies down while many individuals are suffering from a reduction or complete loss of income. If someone was struggling financially before the onset of the pandemic, then the dramatic economic and social changes have not brought any relief. Businesses that were standing on unstable financial footing are now facing additional challenges. Despite COVID-19, bankruptcy remains a vital tool in combating economic hardships.

The experienced lawyers at the Bankruptcy Group have a depth of knowledge and skill in assisting individuals and businesses in financial crisis. To schedule a confidential consultation with our California coronavirus related bankruptcy attorney, call us at (800) 920-5351. We have conveniently located law offices in Roseville and Folsom.

Reasons for Filing Bankruptcy in California

Some of the most common reasons individuals file for bankruptcy are mortgage foreclosure, job loss, unexpected medical bills, a reduction in income, or divorce. The coronavirus pandemic has intensified many of these issues. People who were barely getting by now find themselves completely overwhelmed.

Some small businesses struggle in the best of economic times. Any reduction in revenues could mark a significant financial downturn for any company. The impact of mass closings or a substantial loss of customers has placed many small businesses on the brink of financial collapse.

During this unforeseen nationwide crisis, bankruptcy remains an effective tool to eliminate debt or restructure your financial obligations. Despite court closures, current bankruptcy cases continue to move forward and new petitions can be filed. Whether you are an individual or family looking to file for Chapter 7 or Chapter 13 or a struggling business in need of a Chapter 11 bankruptcy, the Bankruptcy Group has seasoned California attorneys dedicated to providing professional representation.

The CARES Act and California Bankruptcies

To stimulate the economy and provide much needed relief to individuals and small businesses, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was recently passed. Provisions of the CARES Act affect both consumer and small business bankruptcies.

California Consumer Chapter 7 and Chapter 13 Bankruptcies During COVID-19

The CARES Act provides crucial amendments to provisions under Chapter 13 and 7 of the United States Bankruptcy Code. To help debtors during the coronavirus pandemic, changes have been made to ease the negative impact of the pandemic.

Chapter 13 debtors with a confirmed plan and who have experienced a “material financial hardship” directly attributable to the coronavirus will be permitted to petition the court to modify their plan. Most importantly, debtors shall be allowed to extend the length of their plan 24 months beyond the typical 60-month limit, reducing their monthly trustee payment.

The Act does not define “material financial hardship.” However, as many California residents are experiencing unprecedented economic stress, the court will likely be liberal in applying this designation to a debtor’s specific circumstances.

Relief payments from the federal government under the CARES Act or other stimulus programs, to debtors or their family members, will not be considered “income” for the calculation of a debtor’s “disposable income” or for an individual’s eligibility to file either Chapter 7 or Chapter 13. This will permit debtors to have full use and control over any relief payments.

Filing for Chapter 11 During the Coronavirus Pandemic

On February 19, 2020, the Small Business Reorganization Act of 2019 (SBRA) went into effect. The SBRA amended Chapter 11 of the Bankruptcy Code to allow small businesses a more efficient and cost-effective way to reorganize through bankruptcy. The CARES Act further amended this legislation in several ways.

  • Individual or business debtors whose total debt consists of 50%, or more, of commercial liabilities, can file under the amended provisions of Chapter 11 if the total debt does not exceed $7.5 million.
  • The CARES Act and the SBRA allow small businesses to take advantage of Chapter 11 without having to adhere to the usual timelines.
  • Businesses fling under the amendments are not required to pay the traditional quarterly U.S. Trustee fees.
  • Generally, under the new provisions, small businesses will not be subjected to a creditors committee, minimizing the likelihood of disputes that commonly occur during a typical Chapter 11 case.
  • Every case filed under the SBRA and CARES Act amendments will have a standing trustee appointed. Usually, a trustee is appointed in a Chapter 11 bankruptcy to run the operations of a debtor business. However, under the SBRA, the trustee will serve as a supervisor, assisting the debtor through the bankruptcy process.
  • Only the debtor is permitted to file a reorganization plan in an SBRA case. This eliminates the potential of a creditor filing a plan.
  • In a traditional Chapter 11 bankruptcy, at least one impaired class of unsecured creditors must approve a reorganization plan. Under the new amendments, a plan could be confirmed even if all impaired classes reject it.
  • The debtor is not required to file a disclosure statement under the new provisions.
  • The SBRA allows a small business debtor to pay administrative expenses claims over the length of the plan.
  • Another significant change is that equity holders can maintain their interests in their business without having to contribute new value. This means a small business owner can retain their interests in their company even if the plan does not pay unsecured creditors in full.

Call Our California Coronavirus Related Bankruptcy Attorney for a Consultation

Some small businesses and individuals struggled financially before the pandemic hit California. Those with overwhelming debt have found little relief during COVID-19. Bankruptcy remains a viable and often economically sound method of alleviating the stress associated with financial hardship. While the coronavirus has affected the operation of courts across the state, individuals and businesses are still able to petition the court for relief under the Bankruptcy Code. Our experienced California coronavirus related bankruptcy attorneys can assist during this fluid situation. Call the Bankruptcy Group at (800) 920-5351 for a free, confidential consultation.

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