Bankruptcy and Debt Relief During the Covid-19 Crisis

Last updated:
September 14, 2020

Our Philadelphia bankruptcy attorneys answer common questions about Pennsylvania bankruptcy, debtor defense, and debt settlement during the COVID-19 (Coronavirus) crisis. (For information on foreclosure and eviction during the covid 19 crisis, see our post "Pennsylvania Foreclosure and Eviction During the Covid-19 Crisis.")

Can I consult with you about my debts during the crisis?

Yes. Creditors do not rest in a pandemic, and neither do we. All of our bankruptcy, debt settlement, debtor defense, and other services are available. In addition, we offer free bankruptcy and debt consultations via phone or video, including Zoom, Skype, FaceTime, etc.) See our telephone and video meeting page for more details.

We are now offering in-person consultations when they can be conducted safely under our building's Covid 19 safety procedures.

BANKRUPTCY AND COVID-19 FAQ

Can I file for Bankruptcy during the COVID-19 crisis?

Yes. The bankruptcy courts have remained open during the crisis. In fact, all aspects of Chapter 7 bankruptcy and Chapter 13 bankruptcy cases can be conducted via telephone, video, email, and our secure client portal. In many ways, the move online makes filing a case quicker and more convenient for our clients. (Of course, we still receive postal mail and drop-offs from clients who prefer to mail or bring documents to us.)

Will I have to go to court if I file for bankruptcy during the emergency?

In most cases, no. With few exceptions, the bankruptcy court and trustees in the Eastern District of Pennsylvania are conducting all hearings, such as the meeting of creditors (your bankruptcy hearing), via telephone or video for now. The courts have implemented strict safeguards to protect the public and court personnel. If you are a client of Harborstone Law, we will keep you informed of any changes to the court's schedules and procedures.

How do the CARES Act and other Covid legislation affect bankruptcy?

The 2020 CARES Act temporarily* modifies the Bankruptcy Code in two ways that will affect debtors:

(1) COVID-19-related payments do not count towards the means test. Payments related to the COVID-19 crisis do not count when calculating "current monthly income" in Chapter 7 and Chapter 13 cases or "disposable income" in Chapter 13. As a result, debtors can avoid being disqualified for Chapter 7 or making a higher payment in Chapter 13 solely due to the federal stimulus or similar payments.*

(2) Some Chapter 13 Plans Can Be Extended to 72 months. In confirmed Chapter 13 cases, debtors may modify their plans to extend their plan payments for up to seven years if they suffer from financial hardship "directly or indirectly" related to the COVID-19 crisis. (Typically, Chapter 13 plans are 36 to 60 months.) It is still unclear how the courts will interpret these provisions, but it should help some debtors who have reduced income because of the crisis.*

*These changes to the Bankruptcy Code have been extended to March 22, 2022.

(3) Non-residential tenants in bankruptcy given additional time to pay rent or assume or reject a lease. Under the Consolidated Appropriations Act, 2021 ("CAA"), renters of non-residential property can ask for up to 120 days to pay past-due rent. In addition, renters can take up to 210 days to assume or reject a lease. These provisions expire on December 27, 2021.

Quick Note: Free Credit Reports. All three major credit bureaus (Experian, Equifax, and TransUnion) offer free weekly credit reports. The free reports are available through AnnualCreditReport.com during the Covid crisis. We encourage everyone to use this opportunity to review their credit reports. There are plenty of opportunities for creditors to make reporting mistakes during this crisis.

Can I Obtain a Covid-Related Mortgage Forbearance During Chapter 13 Bankruptcy?

Yes, if you qualify. Debtors in Chapter 13 may apply for and obtain Covid-related mortgage forbearances from their lenders when they cannot meet their mortgage obligations. Whether you qualify depends upon the lender and type of loan. The court has issued specific rules for filing such forbearances. For more on mortgage forbearances, see our article on foreclosure and eviction during Covid 19 crisis.

OTHER COVID-RELATED BANKRUPTCY CHANGES

The Bankruptcy Court has issued general and specific guidelines to deal with disruptions caused by the COVID-19, including the following:

Waiver of "Wet Signature" Requirement

The U.S. Bankruptcy Court for the Eastern District of Pennsylvania has suspended the requirement under Local Bankruptcy Rule 5005-7(b) that attorneys secure the debtor's signature on the paper petition and schedules before filing the case electronically. Instead, attorneys may obtain the client's signature electronically through a digital signature service, email, fax, etc.). Our office uses a secure digital signature service, although you can sign with a pen if you prefer.

Telephonic or Video 341 Meetings Extended

The United States Trustee for Region 3 has extended the use of telephone and video for Chapter 7 and Chapter 13 meetings of creditors (341 hearings) until 60 days after the end of the national emergency declaration related to Covid-19. The court will continue to conduct other bankruptcy hearings via telephone until further notice.

DEBT SETTLEMENT AND DEBTOR DEFENSE DURING COVID 19

Are you offering debt settlement services while the crisis is still in effect?

Yes, our debt settlement services are available during the crisis. We can obtain all the information we need from you via phone, email, video conference, or our secure client portal. Not surprisingly, most creditors, debt collectors, and collection attorneys are still operating, and we are too.

Can I hire you to defend against a collections suit?

Yes. We are still providing all of our litigation services, including debtor defense. Most courts are allowing collection lawsuits to go forward, and we are ready to defend you. The courts are holding hearings in many cases via telephone or video. (Note that in Pennsylvania Magisterial and Municipal court collection cases, your attorney typically attends the hearing in your place. Therefore, you do not need to worry about appearing in court if you hire counsel to defend you.)

Can I sue a debt collector who has harassed me during the crisis?

Yes. Creditors don't get a free pass to break the rules just because there is a crisis. We can represent you in consumer law cases and counterclaims under the Fair Debt Collection Practices Act ("FDCPA"), the Fair Credit Reporting Act ("FCRA")," and other Federal and Pennsylvania consumer statutes.

Call us today to discuss your legal options. Your safety and financial success are our top priorities.

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About this Blog

Philadelphia Bankruptcy Attorney is published by Harborstone Law. Harborstone Law represents clients in bankruptcy and debt relief cases throughout Philadelphia and the surrounding Pennsylvania counties.

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Authors
Dan Mueller is a bankruptcy attorney and partner at Philadelphia-based Harborstone Law. Dan helps people and small businesses resolve serious financial and legal issue through bankruptcy and non-bankruptcy debt solutions.
Paul Midzak focuses his practice on debtor defense, dispute resolution, consumer protection law, and Chapter 7 and Chapter 13 bankruptcy. He also advises businesses on a variety of legal matters.
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Harborstone Law represents clients in bankruptcy, debt, consumer, and small business matters throughout Philadelphia, Montgomery, Delaware, Chester, Bucks, Berks, Lancaster, Lehigh, and Northampton Counties in Pennsylvania.
questions? Call our office at 215-248-0989
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