The current Coronavirus pandemic has caused tremendous financial hardship for many Americans. An April 30, 2020 BBC News article reported that 30 million people in the United States have filed for unemployment benefits in a span of six weeks. In these tumultuous and uncertain times, it is hard to believe that the COVID-19 pandemic may be able to work to your benefit. If you have been rocked financially by the Coronavirus pandemic and have overwhelming debt, now may be the time to consider filing for bankruptcy protection.
A Chapter 7 bankruptcy case is intended to give you a fresh start by eliminating your unsecured debts. If you have credit card debt, medical bills, unsecured loans, debt from vehicles that have been turned in or repossessed, or rent due from a prior apartment, you can stop all collection activity related to that debt and eliminate your obligation to pay. The primary metric to determine whether you qualify for a Chapter 7 bankruptcy case is a means test which looks at your average income over the past six months. If your average monthly income for the past six months is below the median income for a household of your size, you will qualify for a Chapter 7 bankruptcy case.
COVID-19 and Your Bankruptcy Eligibility
You may qualify for a Chapter 7 bankruptcy case now, when you may not have before, if you have been out of work or your income has been reduced due to the Coronavirus pandemic. Since the means test averages your income for the past six months, if you have been out of work, your average monthly income will be less and you may now qualify for a Chapter 7 bankruptcy case. You may have considered filing for Chapter 7 bankruptcy protection in the past but were told that you did not qualify due to your income. If that is the case and your income has been negatively impacted by the Coronavirus pandemic, now is the time to revisit filing a Chapter 7 bankruptcy case to get a fresh start.
One questions that often arises when an individual does not qualify for a Chapter 7 due to income is how much time do I have to wait before filing now that my income has been reduced or eliminated? If the means test averages your income over the past six months and you were making very good money prior to the Coronavirus pandemic, it may take several months of reduced income to show that you pass the means test to qualify for a Chapter 7 bankruptcy case; however, that does not mean that you have to wait until you pass the means test to file for Chapter 7 protection. If your job has been eliminated or your income has been reduced and you do not anticipate recovering from the economic downturn in the near future, you can argue a change in circumstances and file for Chapter 7 bankruptcy protection even though you do not pass the means test at the time of filing. Because your circumstances have changed with respect to your income, you would pass the means test if you simply wait it out so it is not necessary to wait in order to file for Chapter 7 protection.
Perhaps your job has been eliminated and you are now receiving unemployment that is supplemented with the $600.00 per week Coronavirus stimulus. Your unemployment benefits together with the stimulus funds may mean that you are making pretty good money while being temporarily unemployed. In addition, you may have received a lump sum Coronavirus stimulus payment within the past six months. So, the question arises, will I still pass the means test with income from the Coronavirus weekly supplement and the lump sum stimulus payment. Any payments you receive related to the Coronavirus pandemic are not counted as income from a means test perspective. Those funds do not factor into the means test to determine whether you qualify for a Chapter 7 bankruptcy case.
Contact the Experienced Bankruptcy Attorneys at Burrow & Associates
If you would like to explore your options and see if you qualify for a Chapter 7 bankruptcy case, please contact Burrow & Associates, LLC for a free consultation. We will evaluate your situation to determine if you can take advantage of the unfortunate impact on your financial well-being caused by the Coronavirus pandemic. We offer free phone and video consultations if you are not comfortable coming into our office.