The coronavirus (COVID-19) has had a devastating impact on the lives of countless Americans. Many have fallen ill, and others have become unemployed and are struggling to make end’s meat. Whether the impact has been to your income or the expense of supplies needed to prepare for this emergency, the unexpected tragedy has caused great financial hardship. Fortunately, there are many different options for relief from debt due to coronavirus. To see which option may be best for your specific circumstances, contact a Tampa bankruptcy lawyer for a free consultation.
COVID-19 Stimulus Check
Congress recently passed the CARES Act, which may provide individuals with a $1,200 stimulus check. For joint filings, the coronavirus stimulus check would be $2,400. Plus, recipients may receive an additional $500 for each minor child. The money is certainly needed, but it may not be enough to solve the bigger, more pressing financial problems. If you have a lot of debt or falling behind on payments $1,200 – $2,400 is only a temporary band-aid. In some cases, the most effective use of the money may be to file bankruptcy.
Bankruptcy can be used to eliminate debt, stop a foreclosure or repossession, and harassing calls from your creditors. There are two types of bankruptcy that borrowers can file, Chapter 7 and Chapter 13. A bankruptcy law firm can explain the differences and advise which type of bankruptcy may be best for your situation.
Chapter 7 Bankruptcy for COVID-19
Chapter 7 bankruptcy is the fastest type of bankruptcy and is designed to give borrowers a fresh start. As soon as the case is filed an automatic stay will be enacted. The stay will immediately end all collection activity, including foreclosure sales, garnishments, and car repos. Additionally, you can discharge debt in Chapter 7 without having to pay anything to the banks. The discharge is a court order that releases the borrower from all personal liability.
Chapter 13 Bankruptcy for COVID-19
Chapter 13 is the other type of bankruptcy used by borrowers. This type of case is often recommended for people trying to save property such as their home or car. As long as you have the property in your possession, you will be protected by the automatic stay. These protections happen automatically once your bankruptcy case is filed. If you fell behind on mortgage payments, instead of making a partial payment that the lender may not even accept, you can file Chapter 13 and force your lender into a five-year repayment plan. You may even be able to use the court’s modification program to modify the terms of your mortgage.
COVID-19 Car Repossession
You can use a Chapter 13 Bankruptcy to save your car even if your lender has a repossession out. As long as you still have your car when you file a Chapter 13, the car will be protected. As part of Chapter 13, you can force your lender into a five-year repayment plan. Additionally, the interest rate may even be lower than what you are currently paying the bank. The payment plan in the bankruptcy is based on the federal bankruptcy code Title 11, which means that you don’t need the bank’s permission.
On the other hand, if your car was already repossessed or if you can simply no longer afford your car, Chapter 7 Bankruptcy can ensure the loan doesn’t haunt you in the future. When a car is repossessed or even voluntarily surrendered, your lender will auction the vehicle. If they are not paid in full for your loan, you will be sent a bill for the remaining amount. The amount will include the balance plus interest, late fees, and legal fees. However, if you discharge the loan in Chapter 7 bankruptcy, you will have no have personal liability for the car debt. Therefore, the bank would be prohibited from taking any collection action against you.
Late Credit Card Payments Because of COVID-19
For most people, the difference between credit card debt because of coronavirus (emergency supplies, living expenses, unemployment) and normal credit card use is plain to see. There is a global pandemic and with so many jobs impacted, people are incurring a lot of credit card debt because of coronavirus. Unfortunately, credit card companies don’t view these types of debt differently. Regardless, whether the debt was for necessary supplies or vacations, lenders will usually take measures to collect the debt, such as:
- Place the account in collections
- Harass borrowers with countless bills and phone calls.
- File lawsuits
If a credit card company is successful in suing you they will receive a judgment. At this point, the company suing you is likely a debt buyer and not the credit card company that you originally owed. The judgment holder will likely be charging interest and their legal fees as they pursue collection. In many cases, the interest and legal fees will be more than the original loan amount. However, a Chapter 7 bankruptcy can eliminate the judgment, including the interest and legal fees. See Florida Statute 55.145.
Medical Bills from Coronavirus
All medical bills from coronavirus should qualify for discharge in bankruptcy. See 11 USC 524. The discharge is a permanent court order releasing your personal liability on the debt. Further, the discharge prohibits a creditor from taking any collection action. In many cases, obtaining a discharge for hospital bills will be the main reason for filing bankruptcy. However, not all debts will be eligible for a discharge in bankruptcy. Therefore, if you are considering filing for bankruptcy, you should speak with a bankruptcy attorney in Tampa before taking any legal action.
Consult a Bankruptcy Law Firm in Tampa
At Florida Law Advisers, P.A., we understand that these are difficult times. Too many Americans are getting ill, losing their job, and falling behind on bills. If you are struggling with debt, we may be able to help. Regardless, whether you need help with Chapter 13, Chapter 7, or other forms of debt relief, we provide the competent legal advice you can trust. Call us now at (800) 990-7763 to speak with a Tampa bankruptcy attorney at our firm.
Frequently Asked Questions
When a Chapter 7 or Chapter 13 case is filed an automatic stay is instantly put into effect. The automatic stay is a federal law which stops all forms of collection activity, car repossessions already scheduled to occur.
There is no specific COVID 19 car payment relief programs. However, Chapter 13 bankruptcy will stop a car repossession and allow you to force the bank to provide five years to pay the loan. Additionally, the interest rate for Chapter 13 will likely be lower than the current rate on the loan.
If the debts are eligible for discharge with Chapter 7 or Chapter 13 bankruptcy, the entire balance can be wiped out. Therefore, late fees, penalties, and legal fees would all be removed under the discharge.
Yes, both Chapter 13 and Chapter 7 bankruptcy can help with credit card debt because of COVID 19. In Chapter 13, the debtor makes payments to their creditors according to a court approved payment plan. On the other hand, Chapter 7 does not involve a payment plan. Instead of monthly payments, the bankruptcy trustee will liquidate non-exempt assets to pay creditors.
All medical bills from coronavirus should be dischargeable in bankruptcy. The discharge is a permanent court order releasing your personal liability on the debt. Further, the discharge prohibits a creditor from taking any future collection action.