Bankruptcy, Foreclosure, and Debt Relief During the Covid-19 Crisis

Last updated:
September 3, 2010

Our Philadelphia bankruptcy attorneys answer common questions about Pennsylvania bankruptcy, debt settlement, foreclosure, eviction, and other financial issues during the COVID-19 (Coronavirus) crisis. See our Important Updates section at the bottom of this page for the latest on foreclosure and eviction moratoriums, federal unemployment supplements, and more.

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

Yes. All of our bankruptcy, debt settlement, and other services are available. 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.

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

Yes. All aspects of Chapter 7 bankruptcy and Chapter 13 bankruptcy cases from the initial consultations can be conducted via telephone, video, email, and our secure client portal. (We are still receiving postal mail for clients who prefer to mail documents to us.) We file all cases electronically, and the courts have required all bankruptcy hearings to be held via telephone or video for the present.

Are the bankruptcy courts and trustees' offices open during the emergency?

Yes, the bankruptcy court and trustees in the Eastern District of Pennsylvania will conduct all hearings, such as the meeting of creditors, via telephone and video for now. To date, the courts are still doing business but with 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.

Are you offering debt settlement/debt negotiation 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, video, email, and our secure client portal. Not surprisingly, most creditors and debt collectors are still operating, and we can reach most of them to discuss settlement. (However, some collectors appear to be understaffed.)

Can my bank or mortgage company foreclose on me in Pennsylvania during the COVIDCOVID-19 crisis?

For many Pennsylvanians, the answer is no. Although the Pennsylvania mortgage and eviction moratoriums have ended, there are separate foreclosure and eviction moratoriums issued by federal agencies, such as the CDC, the Federal Housing Finance Agency ("FHFA") (Fannie Mae and Freddie Mac-backed loans), and the FHA. Thus far, these moratoriums are scheduled to end on December 31, 2020. See our Important Update section below for more. However, foreclosures are possible for mortgages that are not federally backed.

Can my landlord evict me during the crisis?

With some exceptions, evictions have begun in most counties in Pennsylvania. On November 9, evictions in Philadelphia will resume. Note that a landlord cannot evict for nonpayment of rent if you qualify and follow the procedures for the new CDC moratorium on evictions. The CDC moratorium does not cover other breaches of a lease, such as damaging property. (See Important Updates below).

Is my bank or mortgage company required to provide me with a forbearance?

It depends on what type of mortgage loan you have. Under the CARES act, if you have an FHA, VA, USDA loan, or a loan backed by Fannie Mae, Freddie Mac, your mortgage loan provider must offer you a forbearance of up to 180 days with an option for an additional 180 days. Typically, banks are offering three-month forbearance that can be renewed for up to a year. The specific payback options include adding the forbearance amount to the end of the loan (deferral), paying back the full amount in a lump sum, or a payment plan. About 75% of all mortgage loans fall into the government-backed category.

Can I obtain a forbearance if my mortgage is not government-backed?

If your mortgage loan is not government-backed, there is no forbearance requirement. However, some such lenders are offering forbearances. Note that these lenders are not required to allow you to tack the forbearance amount to the end of the loan. Therefore, even if the lender offers a forbearance, be sure that you understand the repayment terms before accepting it.

Will a CARES act forbearance harm my credit?

It should not, as long as you can repay the forbearance amount under one of the options offered by your lender. Under the CARES act, your loan status at the time of the forbearance is frozen. For example, if you were current, your loan will continue to be reported as current during the forbearance. If you were sixty days behind, the forbearance would show you sixty days behind during the forbearance (unless the forbearance was retroactive and cleared the arrearage). That is not to say that some lenders will not consider a CARES forbearance in some way, but it should not hurt your credit rating.

How does the CARES Act affect Bankruptcy?

The 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. Chapter 13 debtors may modify their plans if they can show "material hardship." As a result, debtors can avoid being disqualified for Chapter 7 or making a higher payment in Chapter 13 solely due to the CARES stimulus or similar payments.

(2) Some Chapter 13 Plans 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. 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 expire on March 27, 2021.

IMPORTANT UPDATES

Some Pennsylvania residents on unemployment may receive an additional $300 per week. The payments are limited to residents whose unemployment is related to the Covid-19 crisis and receive at least $100 per week in unemployment. Funds for the payments are likely to run out quickly unless extended.

CDC Issues Residential Eviction Moratorium through the end of 2020. The Center for Disease Control ("CDC") has issued a moratorium on residential Evictions that runs through December 31, 2020. To obtain relief under the order, tenants must file a specific declaration. See our blog post for more details.

FHA and FHFA extend their moratoriums on foreclosure and evictions to December 31, 2020. For homeowners with FHA loans and loans backed by Freddie Mac and Fannie Mae, the moratorium will offer protection through the end of the year.

Philadelphia Eviction Moratorium Extended to November 9, 2020. Eviction hearings in Philadelphia resumed on September 3, 2020. However, landlords with judgments for possession cannot lockout their tenants until November 9, 2020.

Pennsylvania foreclosure and eviction moratorium ends. Pennsylvania's moratorium on evictions and foreclosures ended on August 31, 2020. Massive evictions are expected in the Greater Philadelphia area. However, the CDC's eviction moratorium (See above) may alleviate part of the problem temporarily.

Supplemental Unemployment Scheduled to End. The extra $600 per week in Federal Pandemic Unemployment Compensation ran out on July 25 in Pennsylvania. As of this updater, Congress has not been able to agree to an extension. The end of the program is a severe financial blow to many in Pennsylvania, where the unemployment rate is still in double digits.

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.

Cares Rent Relief Program begins in Pennsylvania. The Pennsylvania Housing Finance Agency (PHFA) will provide $150 million in rental assistance to tenants who qualify throughs the PA CARES Rent Relief Program. Tenants must apply by November 30. Philadelphia residents can apply online, but renters from most other counties must file a paper application by mail or email.

Free Credit Reports. All three major credit bureaus (Experian, Equifax, and TransUnion) now offer free weekly free credit reports. The free reports are available through AnnualCreditReport.com until April 2021. We encourage everyone to use this opportunity to review their credit reports. There are plenty of opportunities for creditors to make reporting mistakes during a crisis.

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 petition and schedules before filing the case electronically. Attorneys may obtain the client's signature electronically (1) through authenticated commercially available digital signature software, either directly or with the debtor's written permission (email permission is acceptable); or (2) through a copy of the signed documents sent to the attorney electronically (email, fax, etc.). The Bankruptcy Court has issued general and specific guidelines to deal with disruptions caused by the COVID-19.

Thank you! Your comment is under review for publication.
Oops! Something went wrong while submitting the form.
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.

Thank You
One of our attorneys will contact you soon.
Oops! Something went wrong while submitting the form.
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.
Connections
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
Committed to finding the best solutions for our clients.

AREAS WE SERVICE INCLUDE: Philadelphia, PA | Montgomery County, PA | Bucks County, PA | Chester County, PA | Delaware County, PA | Berks County, PA | Lancaster County, PA | Lehigh County, PA| Northampton County, PA

©2020 Harborstone Law LLP