Does Covid-19 Create Manageable Payments in a Chapter 13?

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Video Transcribed: Oklahoma City Bankruptcy Attorney Edward Kelley here at 888 Debtline, Continuing our series on why this is a unique and fairly amazing time to be able to file a Chapter 7 or Chapter 13 bankruptcy.

Despite what a trying, difficult time, tragic time for some people, there is a silver lining. This may be your one shot to do a 7, or to have a manageable payment in a Chapter 13. So we’ve talked about three reasons so far already why your stimulus check probably will allow you to have the attorney fee to do it when maybe you didn’t think there was any way you could.

Second, we talked about how you can put off loans, and buy yourself some breathing room, again, maybe to help you get that fee. But also, if you’ve been behind on some secured loans with collateral and things you’re going to keep, why you may absolutely be able to make all that work right now.

That, combined with the stimulus, and our third reason, which is your lowered income. Which, of course, seems like it could only be a terrible thing. Maybe you’re out of work, or your hours are severely cut, working from home far less than you were.

That lowered income may help you to qualify for a 7. And even if it’s only been for a short time, trustees are being very forgiving because we’re completely uncertain as to how long that will last.

So you may legitimately be able to have your income lowered down to where you can do that Chapter 7, done and walk away type of bankruptcy. Or, if you still have to do a 13, if your income’s too high, it’s probably going to be much lower. And your payment in a 13 is based on what you can pay, not what you owe. So that lowered income directly means a lower payment for the entire five years of that plan.

So last reason… then in our next video we’re just going to go over everything… that this could be a perfect time. Because of the no contact and shelter in place orders all over the country, certainly in all jurisdictions in which I practice, Oklahoma, New Mexico, all hearings are being conducted by telephone.

So what does this mean? You can do a bankruptcy without leaving your home. In fact, with only one original, well, batch of original signatures that you would need to mail in.

Everyone understands you’re not supposed to leave your house. So for example, if you hire me, I can get you the packet either by email or fax, if you have that capacity. You can get everything back to me that way. Now I do need some original signatures before I can file. All that can be done by dropping those in the mail, those signature pages.

And in addition, all of the hearings in a typical Chapter 7, Chapter 13, you’re just going to have the one creditor meeting, you normally had to go down to the bankruptcy courthouse and travel, sometimes from across the state, everything done by telephone. So it is no exaggeration to say you can file a Chapter 7 or Chapter 13 bankruptcy without leaving your home.

A completely unrelated silver lining of this pandemic is everybody has become savvy with Zoom and FaceTime and Skype and Google Hangouts, and all these different apps that allow you to meet face-to-face. So that technology’s well-suited to bankruptcy, which is already completely e-file.

I don’t ever have to file the documents at a courthouse, so it doesn’t matter if it’s closed. Federal filings generally are all available to be done through e-filing. And I’ve certainly done bankruptcies that way from the beginning. So you can do everything without leaving your house.