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Santa Barbara, CA Coronavirus (COVID-19) Related Bankruptcy Attorney

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Financial hardships are not immune to COVID-19. If you were facing economic stress before the coronavirus caused nationwide business closures, it is likely that the steps the government has taken to mitigate the spread of the virus have not improved your situation. While California courts are also taking measures to combat the spread of infection, bankruptcy remains a viable option for people facing overwhelming debt. 

If you were contemplating filing bankruptcy before the coronavirus crippled much of the economy or if the statewide business closures have increased your financial stress, contact our Santa Barbara, CA coronavirus (COVID-19) related bankruptcy attorney. To schedule a free, confidential appointment, call The Bankruptcy Group at (800) 920-5351. 

Santa Barbara, CA Chapter 7 Bankruptcies 

The most common type of consumer bankruptcy in Santa Barbara is Chapter 7. Often referred to as a “liquidation” bankruptcy, Chapter 7 is typically the quickest and cheapest way for an individual overwhelmed by debt to get a fresh start. 

When a person files for Chapter 7, the vast majority of their debt will be eliminated in four to six months. This includes credit card debt, unsecured personal and payday loans, certain utility bills, and even some back taxes. 

California residents might worry about whether they can keep their home, car, and other property if they file for Chapter 7. While designed for people with limited income and assets, there are protections written into the Bankruptcy Code and California state law that permit debtors to protect most, if not all, of their property. Our experienced bankruptcy attorneys will carefully review your assets compared with the available exemptions to determine if Chapter 7 is the right option for your situation. 

As stated above, there are income restrictions for eligibility to file Chapter for 7. As of April 1, 2020, the current median income required is listed below. 

  • One-person household – $60,360 
  • Two-person household – $79,271 
  • Three-person household – $88,235 
  • Four-person household – $101,351 
  • Each additional person to in the household increases the median income by $9,000 

It is important to note that just because your gross income may be above the allowed amounts, once your taxes, secured debts, and some other allowed expenses are calculated, you might still be eligible to take advantage of Chapter 7. 

Unfortunately, there are some types of debt that will survive Chapter 7. For example, criminal restitution, alimony and child support are non-dischargeable. In most cases, student loans and tax obligations cannot be discharged as well. There are some rare occasions where your student loan debt might be eliminated, but the necessary requirements are very difficult to meet. Additionally, in some instances, certain back taxes might be discharged. It is crucial to thoroughly review your debts with our skilled attorney so you understand the benefits of Chapter 7. 

Santa Barbara, CA Chapter 13 Bankruptcies 

While Chapter 7 is perfect for many debtors in the Santa Barbara area, there are situations where Chapter 13 is required. While Chapter 7 is designed to eliminate debt quickly, Chapter 13 permits individuals to reorganize their debt, often allowing them the ability to pay back delinquent payments while discharging certain debts. For example, a homeowner facing a foreclosure action on their home could utilize Chapter 13 to save their property while forcing their mortgage lender to accept a three to five-year payment plan. 

The benefits of Chapter 13 do not stop at paying delinquent mortgages. A debtor could force a creditor to return a repossessed vehicle or strip a second mortgage from their home. In situations where a debtor does not qualify for Chapter 7, filing for Chapter 13 might still provide a more cost-effective way of addressing unsecured debt. Often, a debtor will have to pay their creditors significantly less through a bankruptcy plan than they would if they settled their debt or worked with a debt relief company. Additionally, debt eliminated through bankruptcy does not have any federal tax complications, while forgiven debt is considered taxable income. 

Chapter 13 bankruptcies are complicated and it is vital to review your exact situation with our experienced Santa Barbara bankruptcy attorney. Because no two sets of circumstances are the same, the exact benefits Chapter 13 provides will vary from case to case. 

How COVID-19 is Impacting Chapter 7 and Chapter 13 Bankruptcies in Santa Barbara 

The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was recently enacted to provide financial relief to citizens across the nation, including California. In addition to stimulus payments to help people through these difficult times, the CARES Act also amended parts of the Bankruptcy Code to assist debtors impacted by COVID-19. 

One of the most helpful provisions of the CARES Act grants debtors with a confirmed Chapter 13 plan the ability to modify the terms of their plan. If you have fallen behind in trustee payments because of the coronavirus, then you are permitted to add an additional 24 months to your plan. This provision will lower a debtor’s monthly trustee payment during these challenging times. 

Another important change that affects both Chapter 7 and Chapter 13 filers is how stimulus payments are classified in bankruptcy. Typically, income is broadly defined, including your salary, contributions from friends or family members, and income tax refunds. Your monthly income determines if you qualify for Chapter 7 or the percentage of unsecured creditors you have to pay in Chapter 13. The CARES Act eliminates any stimulus or governmental help payment from income in a bankruptcy. This means that any payments you receive will not count towards your monthly income calculations for eligibility or payment amounts. 

Call Our Santa Barbara, CA Coronavirus (COVID-19) Related Bankruptcy Attorney for a Consultation 

During the best of economic times, people find themselves in difficult financial positions. With the severe impact of COVID-19, many people across the state are finding themselves struggling to keep up with their financial obligations. Bankruptcy could be a way to relieve that stress. Our Santa Barbara, CA coronavirus (COVID-19) related bankruptcy attorneys are available to review your situation. To schedule a confidential, free appointment, call The Bankruptcy Group at (800) 920-5351. 

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