The outbreak of COVID-19 cases in the United States drove many states to issue stay-at-home orders and social distancing measures to stymie the relentless spread of the virus. Understandably, federal bankruptcy courts all over the nation have implemented modified operations to support this public safety solution. Consequently, many United States bankruptcy courts have closed to prevent contagion in the courthouse.
In Arizona, many state courts and federal buildings have also announced closure until further notice. Those who filed for bankruptcy in a bankruptcy court that closed before they were able to complete the bankruptcy process would still enjoy bankruptcy protection with the automatic stay remaining in effect and preventing creditors, collection agencies, and other debt collectors from attempting collection efforts such as wage garnishment or any type of communication for the purpose of collection. Those who were meant to file bankruptcy but were not able to do so before the court where they would have typically filed bankruptcy closed should consult a local attorney to see if they could file a bankruptcy petition in another court.
Filing for bankruptcy in the courts that have remained open may require additional steps and new protocols. Everything from entry into the courthouse and office hours to service of process rules and filing deadlines may be modified. Those who are considering bankruptcy at this point should check what specific rules are in place in the courthouse and district in which they wish to file for bankruptcy. Those who have already filed bankruptcy may also want to check with regard to the bankruptcy judges assigned to their bankruptcy cases.
Modified Bankruptcy Rules under the CARES Act
The federal Coronavirus Aid, Relief, and Economic Security or CARES Act has caused temporary changes in the usual bankruptcy rules. The modification is set to expire on March 27, 2021. One particular example delineating the difference is that a debtor with an approved Chapter 13 repayment plan may be allowed to prolong the execution of said payment plan to seven years instead of the maximum five years. The extension, however, may only be granted after notice and a hearing wherein the filer may present proof that the pandemic has caused him or her material financial hardship.
It must also be noted that stimulus checks and other coronavirus-related payments under federal law are not considered current monthly income for those looking to file under Bankruptcy Chapter 7 (liquidation). Neither will they count as disposable income for those looking to declare bankruptcy under Chapter 13 (reorganization). They won’t affect eligibility under either filing chapter. Meanwhile, the debt limit for a business bankruptcy filing under Subchapter V of Chapter 11 has considerably been increased.
Original Signature Requirement Waived
Bankruptcy attorneys are typically required to get a wet signature (original signature) on the petition for bankruptcy from their clients, even for documents filed online. At the time of the COVID-19 outbreak, however, some bankruptcy courts have waived this requirement so that bankruptcy lawyers and their clients need not meet in-person to review paperwork and get the physical signature.
Remote Meeting of Creditors
Under Section 341 of the Bankruptcy Code, bankruptcy filers under Chapters 7 and 13 are required to attend a meeting of creditors, but with coronavirus concerns, the US Trustee Program has mandated that meetings be conducted by forms of remote communication for all bankruptcy filings through July 10, 2020. Filers and their lawyers are urged to check websites of bankruptcy courts to keep up to date on procedural modifications regarding these meetings.
Dealing with Bankruptcy during the COVID-19 Pandemic? Contact an Arizona Bankruptcy Attorney Today!
These are unusual times. Unfortunately, filing bankruptcy has become a necessary step for many individuals and businesses. If you’re seeking solutions, overwhelmed as you are by financial problems, or if you simply need help understanding and navigating the changes that have been put in place in the bankruptcy procedure, you best speak with an attorney specializing in bankruptcy laws right away. Call us at Phoenix Fresh Start for a consultation with an experienced Arizona bankruptcy lawyer.