What Will the CARES Act Mean for Your Bankruptcy?

The recent passage of the $2.2 trillion CARES stimulus package comes as excellent news for many cash strapped Americans. Yet it may also raise some questions if you are in the middle of a bankruptcy case, or are planning on filing.

You can still file and make motions in bankruptcy courts as of this writing. This is an important point for understanding how the CARES Act impacts you. 

Note: this is not legal advice. Every case is different. If you have a specific legal question it’s a good idea to get in touch with our office.

Will bankruptcy mean giving up my stimulus check?

No. The CARES Act specifically excludes national emergency payments from Chapter 7 or 13 as being defined as “current monthly income” or “disposable income.” You aren’t required to use them to pay back your Chapter 13 plan, nor are you required to apply them to the Chapter 7 means test.

You are free to spend your stimulus check as you see fit, or to place it into savings. It’s a reality that some people will need to use their stimulus checks to cover the costs of filing for bankruptcy in the first place. 

I can’t make my Chapter 13 payment because of COVID-19.

The CARES Act wasn’t just about allocating money to people and businesses who desperately needed it. It also added provisions that allow debtors to seek modifications of their Chapter 13 plans due to hardships caused by COVID-19.

The plan payment may be lowered, or extended up to 7 years. 

You will need an attorney’s help to do this as it allows for “direct or indirect” hardship. You will need to make the case that your situation applies under the plan. 

Get financial help if you need it.

Bankruptcy may be a critical tool for helping you protect yourself during the COVID-19 crisis. For example, while evictions wont’ be happening for the next 90 days, your rent bill will still be mounting. You may need to file just to avoid eviction after the 90 day deadline runs out. 

Hopefully you can negotiate with your creditors. If you can’t, feel free to reach out so you can schedule a free (virtual) consultation. We’ll look at your financial situation and determine what your most sensible move might be. 

Together, we’re all going to get through this tough time, one way or another. 

See also:

How to Prepare for a Recession

What is Emergency Bankruptcy?

Protecting Your Goshen, NY Home in Bankruptcy



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