Posted on May 21, 2020

Congress is currently working on another bill to assist people dealing with the COVID-19 pandemic. The bill's title is a tortured attempt at a meaningful acronym and is: the Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act. The bill is currently in the House as HR 6800.

The National Association of Consumer Bankruptcy Attorneys (NACBA), to which I belong, is pushing for several provisions that would help bankruptcy filers. In a recent article on their web site, they listed 5 that are now in the House bill and one that they hope will be added to the House-Senate compromise bill.

Keep Your CARES Act Benefits

Many people applying for mortgage relief and small business loans (PPP and EIDL) have been told that they can't get it because they are in bankruptcy. This has naturally kept other from filing for fear of losing those benefits.

The bill proposes to amend a section of the bankruptcy code (sec. 525) to state that no entity can discriminate against past or current bankruptcy debtors in providing COVID-related mortgage assistance.

Complete Your Chapter 13 Bankruptcy Plan Early

Did you file a chapter 13 bankruptcy before the pandemic in order to pay back your creditors, but later lost your job because of it? Have you incurred large medical bills due to COVID during your plan that make the monthly payments unaffordable?

Under a proposed section, people in chapter 13s would have the option of obtaining a discharge of their debt without completing payments and without converting to a chapter 7 (which could pose other problems or simply not be an available option). The only requirement would be that they have been in a chapter 13 for at least one year.

Extend Your Chapter 13 Plan to Save Your Home

But what if you still need to bring your mortgage current in your plan? Getting an early discharge of your other debt won't help you save your home. You would still come out of bankruptcy behind and facing foreclosure sale.You can't afford your current plan payment, but if you could extend your plan term, you could get a lower monthly amount and still make a go of it.

The problem is, the bankruptcy code caps the repayment plan at 5 years. However, the bill would allow you to extend your chapter 13 plan for up to an additional 2 years, not to exceed 7 years, solely to allow you to catch up on missed mortgage payments or on mortgage payments which had been subject to forbearances.

File Chapter 13 Even with High Student Loans

There are certain debt limits in place under the bankruptcy code if you wish to file a chapter 13 repayment plan (especially to save your home from foreclosure). You can only have a certain total amount of secured and unsecured debt to qualify. Otherwise, you would be left with having to file the much more expensive chapter 11.

But higher and higher student loan balances and mortgages have been blocking the way. The bill provides for each of these limits to be doubled.

Protect Your Home and CARES Act Benefits in a Chapter 7 Bankruptcy

Many people will be filing bankruptcy solely because of the pandemic; had it not occurred, they would be in fine financial shape. They might have lots of equity in their home and be receiving bailout money from the CARES Act and state aid that they don't want to lose.

The bill would create a minimum home equity exemption of $100,000 to protect that non-liquid asset from being sold by a bankruptcy trustee. To give you an idea, the federal exemption for home equity, used here in New Jersey, is $25,150 for 1 debtor and $50,300 for a married couple filing jointly.

In addition, CARES Act stimulus funds and personal bailouts will be protected, so that you can use them to pay the bills and try to get through the pandemic.

We Ain't There Yet!

Bear in mind that these are provisions in a House Bill that, although they passed it, would still have to go to the Senate, where it is set to face stiff opposition from Republicans. In its current form it carries a $3 trillion price tag. However, a compromise bill may still be possible that will contain this needed bankruptcy relief and cost a lot less. So if you are thinking of filing, keep your fingers crossed!

Need to File Bankruptcy Now?

Can't wait for these changes? Need to file now? If you live in Burlington, Camden, Gloucester, Salem or Cumberland County, have decided that you need to file, and are ready to take action, then call my office at 856-432-4113 for a virtual, online meeting to discuss your case.

If you have more questions about bankruptcy and are looking for more information, then download my free book, Top Questions People Ask About Filing Bankruptcy in New Jersey.

Steven J. Richardson
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Bankruptcy, Collections, Student Loan, DUI and Traffic Court attorney in Woodbury, NJ.