Folsom, CA Coronavirus (COVID-19) Related Bankruptcy Attorney
It is not uncommon for some individuals and businesses to suffer under the stress of overwhelming debt and financial strain. When your economic situation is unsustainable, bankruptcy is a viable option for relief. Now that the nation and California are suffering the impact of COVID-19, an increased number of people and businesses are facing financial hardships.
If you are unable to manage your personal debt or if your business is facing an uncertain future due to the “shelter-in-place” orders, our experienced Folsom, CA coronavirus related bankruptcy attorneys could assist you during this challenging economic crisis. To schedule a confidential consultation with the Bankruptcy Group, call us at (800) 920-5351. We have conveniently located law offices in Roseville and Folsom.
Common Reasons People and Businesses File for Bankruptcy in Folsom, California
Individuals in California file for bankruptcy for a variety of reasons, including mortgage foreclosures, job loss, a significant reduction in income, or unexpected medical expenses. The current coronavirus pandemic has exacerbated many of these issues.
In the best of economic times, many small businesses struggle to stay financially viable. Now, facing mandatory closures or substantial decreases in revenue due to COVID-19, many small businesses are on the brink of failure.
As the coronavirus continues to rage across the state, filing for bankruptcy is still an effective way to restructure your financial obligations or eliminate debt. Chapter 7 or Chapter 13 could provide a fresh financial start for individuals or families, while Chapter 11 is available to help small businesses navigate these challenging times.
The Effect of the CARES Act on Folsom, CA Bankruptcies
Congress passed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) to help stimulate the economy and provide necessary relief to small businesses and citizens.
Several provisions of the CARES Act have a positive impact on individuals and companies filing for bankruptcy.
Folsom Chapter 7 and Chapter 13 Bankruptcies During the Coronavirus Pandemic
The CARES Act provides critical, temporary amendments to the United States Bankruptcy Code. The amended provisions help debtors whose bankruptcies might be negatively affected by COVID-19.
One significant change allows debtors more flexibility in modifying a currently confirmed bankruptcy plan. If a debtor has experienced a “material financial hardship” that adversely impacted their ability to make monthly trustee payments, they are now able to petition the court to modify their bankruptcy plan to extend their payments over an additional two years. This means that in cases directly affected by the coronavirus, the 60-month time restriction might no longer apply. While CARES Act does not define “material financial hardship,” California bankruptcy courts will likely broadly define “hardships” due to the overwhelming financial stress many residents are currently experiencing.
Typically, under the Bankruptcy Code, the definition of income is expansive. In addition to an individual’s salary, gifts from friends, tax returns, and most other forms of financial gain are also considered income. However, under the CARES Act, any government relief payments made to individuals or families will not be considered income for purposes of determining “disposable income” or eligibility to file for bankruptcy. This will allow debtors free use of the stimulus income without fear that it will impact their bankruptcy.
Amendments to Chapter 11 Bankruptcies to Combat COVID-19
The Small Business Reorganization Act of 2019 (SBRA) went into effect on February 19, 2020. The SBRA amended provisions of the Bankruptcy Code, granting small businesses a more cost-effective and efficient way to restructure through Chapter 11.
The CARES Act went further, making additional amendments to assisted businesses affected by COVID-19.
- Debt thresholds have been amended, allowing Individuals or small businesses whose total debt does not exceed $7.5 million and whose debt consists of at least 50% commercial debt.
- Debtors filing SBRA cases under Chapter 11 are no longer required to follow the typical deadlines.
- Quarterly U.S. Trustee fees are not applied to SBRA debtors.
- In an ordinary Chapter 11 proceeding, a business would be subject to a creditors committee. Under the amended provisions, this is no longer the case, reducing the risk of disputes during the case.
- When a business files Chapter 11, a court-appointed trustee is usually put into place to manage the operations of the company. In every case filed under the new CARES Act amendments, a trustee will be appointed as a supervisor to help guide the debtor through the process.
- In an amended SBRA case, the small business debtor is the only entity permitted to submit a reorganization plan. Creditors are now prohibited from filing competing plans.
- Under the amended provisions, a reorganization plan could be confirmed if all impaired classes of creditors reject it. Under a pre-SBRA and CARES Act Chapter 11, at least one impaired class would have to approve the plan.
- The CARES Act now allows debtors to pay administrative expenses throughout the reorganization plan.
- One more significant amendment allows equity holders to maintain their interests without having to contribute new value to the business, allowing an owner to retain their interests even if their unsecured creditors are not paid in full.
Call Our Folsom, CA Coronavirus Related Bankruptcy Attorney for a Consultation
Many people and companies were facing overwhelming debt before COVID-19 negatively impacted California. With the pandemic raging across the state, many of those under an economic strain can find relief through bankruptcy. Small businesses and individuals are still able to petition for relief under the Bankruptcy Code despite court closing throughout the state. Our experienced Folsom, CA coronavirus related bankruptcy attorneys will help during this difficult time. Call the Bankruptcy Group at (800) 920-5351 for a free, confidential consultation.