The COVID-19 pandemic has been a huge disruptor for all businesses. During these unprecedented times, with unemployment rising and both business revenue and personal assets declining, filing bankruptcy might make sense – especially if you are struggling with debt. In addition to the typical bankruptcy cases, people who once were not qualified to file bankruptcy before due to either their high income or assets might NOW be qualified to file bankruptcy.
Currently, all bankruptcy cases are moving forward, via electronic filing and telephonic hearings.
In addition, if you received or going to receive government stimulus payments during the COVID-19 pandemic, bankruptcy trustees cannot seize that asset, and the payments will not affect your income reported on the means test of your Chapter 7 or a Chapter 13 filing. The new legislation also allows those who file for Chapter 13 bankruptcy to adjust/modify their payment plan to as much as seven years. Furthermore, it requires lenders to grant borrowers up to 180 days of forbearance if requested, and the lender cannot charge penalties and late fees during these times. However, to qualify, the borrower must prove that they are experiencing financial challenges directly or indirectly caused by COVID-19. This law also addresses federally-backed residential mortgage loans, foreclosures, and evictions.
Bankruptcy is a snapshot of a person’s CURRENT financial picture, not their past performance or even future expectation. There are 2 types of bankruptcy:
First is what they call a total liquidation bankruptcy (Chapter 7). In Chapter 7, you eliminate the majority of your debts. However, there are certain debts that you cannot get rid of, such as fine and restitution, taxes, both state and federal, that are less than 3 years old, and student loans, to name a few.
You can keep/exempt the majority of your assets. In New York, you have the option of either using the Federal Exemption or the New York Exemption. Some types of exemptions allowed are as follows:
New York Exemption
- Homestead – equity in a house of $170,825 (New York City)
- Homestead – Equity in a house of $25,150
- $4,000 for your motor vehicle. (11 U.S.C. § 522(d)(2).)
- $1,700 for jewelry. (§ 522(d)(4).)
- $625 per individual item, with a $13,400 aggregate value on household goods, furnishings, appliances, clothes, books, animals, and other personal properties.
- $2,525 for tools of the trade including implements and books.
- Wildcard exemption — Currently, $1,325 plus $12,575 of any unused portion of your homestead exemption is available to exempt any property of your choosing.
- $25,150 for personal injury, except for pain and suffering, or pecuniary loss.
- Any award for the loss of future earnings you need for support.
The second type of bankruptcy is what they call a restructuring plan (Chapter 11 or 13). The only difference is its limits. As of 2020, limits in Chapter 13 are approximately $419,275 in unsecured debt and $1,257,850 in secured debt. Anything higher than $1,257,850, and you must file a Chapter 11.
My name is Venky Anandarangam and I am a Bankruptcy Attorney at Zimmet Law Group, PC. I have over 25 years of experience in Bankruptcy Law, both in Chapter 7 and Chapter 13. Amid financial uncertainty due to COVID-19, you may be considering filing for bankruptcy, or you may know someone that is considering filing bankruptcy. You can contact me at (212) 922-1330. I will be glad to give a free consultation to see what options you may have.