CHANGES TO CHAPTER 13 TO HELP THOSE IMPACTED BY THE COVID-19 VIRUS
On March 27, 2020 the “CARES Act” was signed into law. This is a consumer protection statute designed to help individuals who have been impacted, either directly or indirectly, by the COVID-19 virus. Neither you nor a family member has to have actually caught the virus to be impacted. If someone in your household has recently been permanently or temporarily ‘laid off’ or their hours have been reduced, you have a strong basis for showing that you have been impacted. This act contains a myriad of provisions and helps consumers in varied areas such as evictions, student loans, mortgage foreclosures, utility service arrearages, debt collection, repossessions and bankruptcy. However, this article will concentrate solely upon the changes to the Bankruptcy Code involving confirmed Chapter 13 bankruptcy cases.
In a Chapter 13 bankruptcy case, individual debtor(s), pursuant to a plan prepared by their attorney, are required to make a monthly payment to a court appointed Chapter 13 trustee. In the Eastern District of New York, where I practice, this trustee will either be Michael Macco or Marianne DeRosa. Once the proposed plan is confirmed or approved by the Bankruptcy Court, the trustee, after taking a commission, will start to make payments to your various creditors. The maximum term of a Chapter 13 plan is normally 5 years. This means that you will have no more than 5 years to pay back your creditors. If you fall behind with the payments to the trustee, the trustee will undoubtedly make a motion to dismiss your case due to your failure to make these plan payments. Chapter 13 plans are regularly used to pay back mortgage arrears by individuals who are in foreclosure and as a result, they are usually making their regular monthly mortgage payments in addition to a payment to the trustee to catch up with their mortgage arrears.
As a result of the COVID-19 virus, many individual debtors or their family members have either been temporarily or permanently ‘laid off’ from their jobs and no longer have the ability to make both their mortgage payments and the Chapter 13 plan payments. Provisions within the ‘Cares Act” allow individuals who have already had their Chapter 13 plans confirmed as of March 27, 2020 to amend their plan post-confirmation and spread out their remaining payments over a 7 year period from the date of confirmation. This will enable you to reallocate missed payments and most likely reduce your monthly payments going forward. In order to do so, you must show that you were either directly or indirectly impacted by the Corona-19 virus. This amendment will sunset on March 27, 2021. As a result, if you have already filed a Chapter 13 petition, your plan has been approved by the Bankruptcy Court and you have trouble making your plan payments due to COVID-19, it is imperative that you contact your bankruptcy attorney to commence making plans to modify your plan post-confirmation.