COVID-19 Office Procedures
Navigating Bankruptcy in New York and New Jersey During the Pandemic
Is Your Office Still Taking On New Bankruptcy Cases At This Time, And If So, How?
We are definitely taking on new clients during this time. Fortunately, all of our systems were in the cloud prior to the pandemic, so the transition to remote work has not resulted in an interruption of our work or communication with current and new clients.
Is There Anything Specific That People Should Know Regarding The Court System And Ongoing Or New Cases?
To maintain the flow of cases and allow people to continue to file new cases, the bankruptcy courts have continued operating remotely via telephone. Since the pandemic, I have been on the phone with the court and clients on a daily basis to conduct 341 hearings. This has been working surprisingly well, which is important because now—perhaps more than ever—the continued operation of the bankruptcy courts is vital.
Most state and civil courts are closed until further notice. I would assume they will remain closed for at least another 30 to 60 days. When representing people who are being sued for credit card debt, the attorneys at my firm regularly appear in civil and state courts, but those cases are at a complete standstill. This means that if you are dealing with this type of case, you do not currently have to worry about the courts taking action or enforcing any judgments.
Should I Wait To File For Bankruptcy And Wait To Hire A Debt Defense Attorney Until The COVID-19 Crisis Has Subsided?
When it comes to bankruptcy, there is a good and a bad time to file—regardless of whether there’s a pandemic. This is because there is a six-month lookback period, which means the courts will look at your income over the past six months. You might wait to file for bankruptcy if you had a high-paying job during the past six months, because your income might be too high to qualify for bankruptcy. If you’ve just been laid off from that high-paying job, then you should wait a few months before filing so that you don’t run the risk of being denied based on the prior amount of income.
Another reason it might be wise to wait before filing is that bankruptcy takes care of the debt as of the date of filing; it does not address debt incurred after bankruptcy has been filed. This means that if you foresee a large medical expense in the near future, you might wait until that has been incurred so that it can be included in the bankruptcy. Similarly, if you have rent arrears and it is the end of April, you might want to pay rent for the month of May before filing for bankruptcy.
If you’re going to get a stimulus check, you should spend it on basic necessities such as food, rent, and clothing before filing for bankruptcy. This is because if the stimulus check is in your account, the cash limit for bankruptcy might be exceeded, and you might not be eligible to file for bankruptcy as a result.
Ultimately, if you need to file for bankruptcy, then file sooner rather than later. However, if you can give consideration to the aforementioned reasons to hold off for a period of time, it would be wise.
Can I Actually File For Bankruptcy During The COVID-19 Shutdown? How Do I Even Start A Bankruptcy When Most Offices And Courthouses Are Closed?
You can definitely file during the COVID-19 pandemic because the bankruptcy courts are open and currently accepting electronic filings from attorneys who represent petitioners. We are also set up to meet and communicate with you remotely via telephone, video chat, email, text messaging, or fax. We can quickly help you determine whether you qualify for bankruptcy, and if so, send you the documents we’ll need in preparation of the bankruptcy petition. Once the filing goes through, you will automatically receive bankruptcy protection, which means all collection activities by creditors will be prohibited. This will give you much-needed room to breathe, as well as the opportunity to move toward the fresh start you deserve.
If I Can’t Afford The Payments In A Chapter 13 Bankruptcy, Will I Automatically Have To File For Chapter 7 Bankruptcy?
If you enter a Chapter 13 bankruptcy, you will make payments in accordance with a payment plan that lasts three to five years. This type of bankruptcy will allow you to protect real estate, such as a home that is at risk of foreclosure. If you do not make enough money to make the payments on a Chapter 13 payment plan, then you will need to file for Chapter 7 bankruptcy. If you would prefer filing for Chapter 7 bankruptcy but your income is too high, then you would have to file for Chapter 13 bankruptcy.
If you only qualify for Chapter 7 bankruptcy and you also have real estate with an amount of equity that does not exceed the exemption amount, then we can guide you through a combination of different chapters of bankruptcy that will allow you to protect your real estate while at the same time have the rest of your debts discharged. This approach, however, is complex and relatively uncommon.
Chapter 13 payment plans are designed based on the amount of your disposable income (i.e. the amount of money left over each month after rent, utilities, and food expenses have been paid). For example, if you have $200 of disposable income, then that is the amount that would be paid each month toward the three to five-year payment plan. Given the pandemic, many people do not even have enough money to pay for the necessities each month; Chapter 7 bankruptcy is precisely for this type of situation.
Do You Expect To See A Rise In Bankruptcy Cases During And After The COVID-19 Crisis, And If So, In What Sectors?
Due to the pandemic, claims for unemployment are at all-time record highs, which means that there are a lot people who are out of work. To make matters worse, many people will be unable to return to their previous jobs because so many employers will be out of business due to the loss of income associated with the pandemic. Taking this into consideration, I do believe that there will be many more bankruptcies filed over the next 12 months.
One sector of the economy that has been particularly decimated by the COVID-19 pandemic and the resultant economic fallout is the gig economy of independent contractors, such as drivers for Uber, Lyft, and Grubhub. Ordinarily, independent contractors who lose their jobs are not eligible to receive unemployment benefits, but the CARES Act—the same act that is providing stimulus money to Americans amid the pandemic—states that independent contractors are entitled to unemployment benefits. However, I have found that these workers are struggling to actually obtain these checks. Further, even if they do obtain these unemployment checks, it is unclear whether this type of work will return in sufficient amounts to make it worthwhile. Unfortunately, this combination of events points to bankruptcy.
Do You Think A Lot Of Small Business Owners Will Have To Fold Up Shop And Declare Bankruptcy? Does It Mean The End Of Your Business If You Declare Bankruptcy?
Right now, a lot of the calls that I get are from small business owners. In fact, I’m handling three small business bankruptcies this week. This pandemic has hit small businesses particularly hard, because small businesses often run on really thin margins, which means they can’t handle much economic disruption before having to shut down. The pandemic has created two months’ worth of economic disruption, and will continue for many more weeks or months.
A small business is entitled to a Chapter 7 bankruptcy, which liquidates consumer debts. However, unlike Chapter 7 bankruptcy for an individual, a small business does not get a discharge of debts through Chapter 7 bankruptcy. When a small business files for Chapter 7 bankruptcy, they are looking for a trustee to be assigned by the bankruptcy court to close out the books and accounts associated with the business. The other alternative is for the business owner to just walk away from the business and deal with all of their creditors scrambling to file lawsuits.
Usually, a small business bankruptcy is accompanied by a personal bankruptcy for the owner of the small business. This is because it is common for the owner of a small business to have personally guaranteed some or all of the debts of the business. The positive aspect of this is that the business owner will no longer be responsible for paying those debts.
Is There Any Government Relief Being Offered During The Coronavirus Pandemic To Uber, Lyft, And New York City Taxi Drivers Or Companies?
I don’t know of any government benefit that’s being provided to Uber or Lyft drivers right now, but I do know that they are likely receiving benefits under the CARES Act, which was written into law about a week or two after the pandemic was announced. This act allows for a stimulus payment of up to $1,200 for every individual who filed taxes in 2018 or 2019. There is an additional payment for people who have children.
Independent contractors such as those working for Uber or Lyft are entitled to receive this stimulus payment, and are also able to apply for unemployment benefits under the CARES Act. At minimum, an independent contractor may be eligible to receive $600 per week in unemployment pay. Depending on their income before the pandemic, they could receive more than $600 per week. Despite this relief, creditors will continue seeking payment for both secured debts (e.g. mortgages, car loans) and unsecured debts (e.g. medical bills, credit card debt). For many people, bankruptcy will still be necessary.
What Type Of Bankruptcy Do I File As A New York City Tax Driver, Or An Uber/Lyft Rideshare Driver?
Most taxi or Uber/Lyft drivers will qualify for Chapter 7 bankruptcy, which is a complete liquidation of consumer debts. From beginning to end, the process takes about three months. If a taxi or Uber/Lyft driver does not qualify for Chapter 7 bankruptcy (which may be the case if the equity in their house exceeds the exemption amount, or if their income is above the median for the area where they live), then they would have to file for Chapter 13 bankruptcy.
Taxi medallions are often mortgaged, and one of the issues with mortgaging a property is equity. If a taxi driver’s taxi business is worth more than they owe on the medallion, then the equity will have to be exempted in order for them to qualify for Chapter 7 bankruptcy. However, even prior to the pandemic in New York City, taxi medallions had lost tremendous value as a result of Uber, Lyft, and other ridesharing companies entering the market and depressing the value of taxi medallions. As a result, I don’t foresee too many instances of ineligibility for Chapter 7 bankruptcy due to the equity in a medallion.
For Uber and Lyft drivers who are leasing or financing their vehicle, one of the primary concerns is whether they will be able to keep their vehicle if they file for Chapter 7 bankruptcy. Fortunately, the answer is yes, so long as the driver does a lease assumption (if they are leasing the vehicle) or reaffirmation of the debt (if they are financing the vehicle). Both documents essentially state that notwithstanding the bankruptcy, the filer wants to take the debt associated with the auto loan out of the bankruptcy and continue making payments so that they do not lose the vehicle.
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