Orange County Coronavirus (COVID-19) Related Bankruptcy Attorney
Even when the economy is doing well, people and businesses can still find themselves overwhelmed by debt and face severe financial strain. Now that much of the country is being negatively impacted by Novel Coronavirus Disease 2019, more commonly called COVID-19 or simply “the coronavirus,” more people than ever are struggling financially.
During this pandemic, bankruptcy can be an effective tool to address financial difficulties. By providing a means to eliminate or restructure debt, bankruptcy can provide a first step toward a fresh financial start. If you were contemplating filing for bankruptcy or are just feeling the strain of financial distress, all our Orange County coronavirus- and COVID-19-related bankruptcy attorneys today. Contact The Bankruptcy Group at 1-800-920-5351 to schedule a free, confidential consultation.
Orange County Individuals and Families Filing for Chapter 7 Due to the Coronavirus
The most common form of bankruptcy in Orange County is Chapter 7. Also known as a “liquidation” or “straight” bankruptcy, Chapter 7 is intended for people with limited income and assets. If you meet the income qualifications, filing for Chapter 7 permits you to discharge the majority of your debt.
Typically, all unsecured debt, including credit card debt, medical bills, utility bills, and personal loans, is eliminated. Under certain circumstances, you might be able to discharge back income taxes. Unfortunately, there are a number of debts that may survive bankruptcy, including alimony, child support, criminal restitution, most taxes, and – except in very rare instances – student loans.
As stated above, there is an income requirement. You will have to pass the “means test” to file Chapter 7. This means test calculates your total household income and compares it to the median income in California to determine eligibility. As of April 2020, the median yearly incomes for households in Orange County are as follows.
- Households consisting of one person – $60,360
- Households consisting of two people – $79,271
- Households consisting of three people – $88,235
- Households consisting of four people – $101,351
- For each additional individual in the household, the median income increases by $9,000.
The “means test” involves a complicated form that calculates your income along with certain allowable expenses and deductions. In other words, just because your gross income is higher than the median does not mean you will not qualify under the “means test.”
One fear that accompanies the thought of bankruptcy is losing a home, car, or other important personal property. Chapter 7 is a liquidation bankruptcy, meaning that you could be required to turn over property to a court-appointed trustee. However, in many cases, this does not occur. The Bankruptcy Code and California law provide exemptions that permit a debtor to protect certain property. Our experienced bankruptcy attorneys can thoroughly review your income and assets before we recommend filing Chapter 7.
Filing for Chapter 13 Due to the Coronavirus in Orange County, CA
If you make too much money, have non-exempt assets, or need to address secured or priority debt, Chapter 13 is probably the type of bankruptcy you need. Chapter 13 is for reorganizing your debt, allowing you to discharge some and pay some back based on the type of debt, level of income, and equity in any non-exempt property. A common reason people file Chapter 13 is to stop a mortgage foreclosure.
Orange County Small Businesses and Chapter 11 Bankruptcy Due to Coronavirus
If you have a struggling business and need to reorganize your financial obligations, Chapter 11 bankruptcy could help keep that business going. If you file Chapter 11, your business retains possession over company assets but will have a fiduciary duty to your creditors. Chapter 11 bankruptcies are very complicated but give a business many ways to reorganize. If you believe your company would benefit from filing for bankruptcy, contact our knowledgeable lawyers to review all of the facts of your case.
The Effects of COVID-19 on Bankruptcies in Orange County, CA
To combat the negative financial impact of COVID-19 across the nation, Congress passed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). In addition to providing individuals, families, and small businesses with stimulus funds, the CARES Act also modified provisions of the Bankruptcy Code to assist debtors considering or involved in bankruptcy.
The CARES Act and Orange County Chapter 7 and Chapter 13 Bankruptcies
Household income plays a vital role in determining the type of bankruptcy a person will file. Additionally, income will influence the amount a Chapter 13 debtor will have to pay through their bankruptcy plan. Income is usually defined to include any funds that are contributed to the household, including salaries, unemployment, pensions, social security benefits, and contributions from friends or family members. Under the provisions amended during the coronavirus pandemic, any funds received through a stimulus program are not considered income. This allows a debtor the use of the funds without worrying about the exact income affecting their bankruptcy.
For debtors in Chapter 13 struggling to make their monthly trustee payments, the CARES Act amended the Bankruptcy Code to permit debtors to modify their bankruptcy plans. To qualify for this amendment, your plan must have been confirmed, and a “material financial hardship” directly related to COVID-19 must have caused you to fall behind in payments. Typically, a bankruptcy plan was limited to 60 months, but the amended provision allows debtors to stretch their plans an additional 24 months. This will allow debtors to lower their monthly payments, helping them weather the coronavirus pandemic’s severe economic impact.
Orange County Businesses and Chapter 11 Bankruptcy Under the CARES Act
The CARES Act also amended the Business Reorganization Act of 2019 (SBRA). The SBRA made filing Chapter 11 easier and more cost-effective for small businesses in Orange County. More specifically, the CARES Act made the modifications listed below.
- Reduced or eliminated certain Chapter 11 deadlines
- Eliminated quarterly US trustee fees
- Got rid of the requirement for creditor committees
- Created trustees to guide small businesses through the process
- Only businesses permitted to propose reorganization plans
Call Our Orange County Coronavirus (COVID-19) Related Bankruptcy Attorney for a Consultation
The coronavirus has adversely impacted families and businesses across California. While it has limited some access to the courts, bankruptcy remains a viable option for those struggling financially. If you were considering filing for bankruptcy before the coronavirus pandemic hit, know that you don’t have to let COVID-19 stop you from moving toward financial freedom. Contact our Orange County coronavirus (COVID-19) related bankruptcy attorneys to review your situation in a free, confidential consultation. Call The Bankruptcy Group at 1-800-920-5351 today.