President Biden Extends Parts of the CARES Act

 

President Joe Biden signed the “COVID-19 Bankruptcy Relief Extension Act” into law to extend provisions providing financially distressed consumers and small businesses greater access to bankruptcy relief. The legislation extended personal and small business bankruptcy relief provisions that were part of the CARES Act through March 27, 2022. 

The is significant, especially for small businesses electing to file under subchapter V.  See H.R. 1651; however, the “Consolidated Appropriations Act of 2021” (CAA) was not extended.

Other bankruptcy provisions extended to 2022 by the COVID-19 Bankruptcy Relief Extension Act include:

• Amending the definition of “income” in the Bankruptcy Code for chapters 7 and 13 to exclude coronavirus-related payments from the federal government from being treated as “income” for purposes of filing bankruptcy.
• Clarifying that the calculation of disposable income for purposes of confirming a chapter 13 plan shall not include coronavirus-related payments.
• Explicitly permitting individuals and families currently in chapter 13 to seek payment plan modifications, including extending their payments for up to seven years.

If you find yourself either experiencing financial difficulties, or foresee the possibility of financial difficulties, as a result of the pandemic, you should seek the advise of a competent bankruptcy professional in your area that can help you come up with a financial game plan moving forward.

IRS Extends Tax Filing Deadline For 2020 Taxes

The Treasury Department and Internal Revenue Service announced today that the federal income tax filing due date for individuals for the 2020 tax year will be automatically extended from April 15, 2021, to May 17, 2021. The IRS will be providing formal guidance in the coming days. 

Earlier this year, following the disaster declarations issued by the Federal Emergency Management Agency (FEMA), the IRS announced relief for victims of the February winter storms in Texas, Oklahoma and Louisiana. These states have until June 15, 2021, to file various individual and business tax returns and make tax payments. This extension to May 17 does not affect the June deadline. See the following articles:

https://www.irs.gov/newsroom/tax-day-for-individuals-extended-to-may-17-treasury-irs-extend-filing-and-payment-deadline

https://www.bloomberg.com/news/articles/2021-03-17/irs-plans-to-delay-tax-deadline-to-mid-may-after-chaotic-year

Covid 19 Foreclosure Moratoriums Extended

 

FORECLOSURE MORATORIUMS

The vaccine rollout is proceeding, but the economic effects of the pandemic are still being assessed.  There is some relief for borrowers whose mortgages are backed or owned by the federal government. The moratorium on foreclosures imposed by the Federal Housing Administration (FHA), Veterans Administration, the U.S. Department of Agriculture (USDA), Fannie Mae, and Freddie Mac will remain in effect until June 30, 2021.

 

The bad news is, eventually the mortgages will have to be paid up.  While it is not known what the government will do regarding the mortgage arrears, some attorneys are anticipating an avalanche of foreclosure filings which may lead to an avalanche of bankruptcy filings.  

 

Keep in mind, the moratorium is not mortgage relief.  Once the moratoriums end, the mortgage arrearage will have to be paid.  You may want to call a consumer advocate attorney in your area to see what options you may have.

Repossession/Bankruptcy: Can I get my car back?

From time to time the Supreme Court of the United States makes a decision regarding a bankruptcy matter. Most recently the Court decided City Of Chicago, Illinois vs. Fulton in January of 2021. In this case, the city of Chicago repossessed a vehicle for failure to pay fines. Shortly thereafter the owner of the vehicle filed a Chapter 13 petition, and demanded a return of the vehicle under a provision of the bankruptcy code known as the Automatic Stay (11 U.S.C § 362). More specifically, 11 U.S.C. § 362(a)(3) prohibits “any act to obtain possession of property of the estate or of property from the estate or to exercise control over property of the estate.”

The Court recognized there was a split in authority regarding whether property had to be automatically returned upon the filing of a petition for bankruptcy, or whether it required a motion before the court for a turnover of the property. The Court ended up holding that 11 U.S.C. § 362(a)(3) essentially stopped any affirmative actions to repossess after the bankruptcy had been filed, and did not contain any affirmative provision to automatically return the property. That is, the creditor recognized the creditor was simply holding the property status quo. The procedure for the return of the property should be by motion to the court.

The Court also made it clear this decision was limited to 11 U.S.C. § 362(a)(3), and that there may be other provisions of the bankruptcy code by which the debtor may be able to demand a return of his vehicle, such as 11 U.S.C. § 542, but since that was not before the Court, the Court did not make a ruling as to the applicability of 11 U.S.C. § 542.

This ruling does not seem to have any effect on Florida which follows Bell-Tel Fed. Credit Union, consistent with City Of Chicago, Illinois vs. Fulton, which recognizes the turnover provisions of the bankruptcy code operate as to the property of the estate. In Bell-Tell the Court looked to see if the debtor still had legal or equitable interest in the property. In Bell-Tell the Court held that since the repossession occurred because the debtor breached his agreement with the lender (failure to make payments), the debtor only held a right of redemption, and legal ownership interest in the vehicle passed to the creditor upon the creditor taking possession pursuant to Florida; the vehicle was not part of the estate. If you have a vehicle, or other property that has been repossessed, or you think may be repossessed, I encourage you to seek the advise of a competent bankruptcy attorney in your state.

Bankruptcy Consultation: What To Expect; What To Bring

 Last Updated: September 8, 2020.

So you set up an appointment for a bankruptcy consultation. What next?

First of all, relax. People tend to get nervous, or anxious, when needing to speak with an attorney. Remember that any attorney that agrees to represent you will be your advocate. The consultation is so the attorney can understand you particular situation, and advise you as to what your various options are regarding the filing, or not filing, of bankruptcy.

I know what you are thinking, “not filing”? Make sure you ask the attorney if he or she practices under the Fair Debt Collection Practices Act. Yes, there are some alternatives to filing bankruptcy you may want to try.  You should discuss this with your bankruptcy attorney.

What to Bring:

1. 7 months pay advises (Gross Earned Income and Net Income).
2. Payoff figures on secured assets (approximate)
3. Value of secured assets (approximate)
4. Number of payments left on assets, if less than 60.
5. Year, Make, Model, and mileage of vehicles and motorcycles.

Generally, my consultations last approximately an hour, with some being a little longer. It is helpful to have the items on the above list. A short discussion of each is as follows:

1. 

   Pay advises, such as pay stubs, or other document reflecting the gross income and withholding you have had during the past 7 months, for you and your spouse (even if the spouse is not filing). If you and your spouse live in separate households, make sure to let the attorney know, as special rules may apply to your situation.
2. Payoff figures are needed to determine how much longer you have to pay, and how much, if any, equity you have in the property.
3. Value. This is need in many situations to, again, determine how much equity is in the property. The equity is important because is helps determine what assets you have from a bankruptcy perspective.
4. Number of Payments. This is important should your income be more than the median income for a household of you size in the state in which you live, to determine which form of bankruptcy you may be able to file. It may also be useful in advising you what to expect depending on when you file.
5. Year, Make, Model and mileage. This is useful in determining value and other useful information, such as deductions, when filing. Again, it can help in being able to advise you as to what to expect through the various forms of bankruptcy, or in some cases, what to expect if seeking other forms of debt relief.

While a consultation can still be done without these items, being the documents ask for often helps in facilitating the consultation and enables the client to receive much more accurate information regarding their particular case.

Exemptions: Florida Retirement

 

 A Chapter 7 Bankruptcy is a process one goes through regulated by the Federal Code, Federal Bankruptcy Rules, State Laws, Local Rules, and Court decisions. This chapter of bankruptcy allows one to discharge most debts, however, it does not allow one to keep a lot of stuff while discharging their debts. What one can keep is usually referred to as exempt property.

The exempt property for cases filed in Florida is composed of items according to Federal Law and State Law. Traditionally, the property exempt in Florida would have to be specifically waived in order for the property to lose its exemption status, including retirement funds such as 401(k) accounts. There recent case law that could significantly effect these exemption rights on a case by case basis.

If you are planning on filing Chapter 7 or 13 in Florida, I highly recommend you seek the advise of a local bankruptcy attorney regarding your exemptions, and possible complications that could arise.

Impound: Can I Get My Car Back If I File Bankruptcy?

The following question has been posed to the Supreme Court of the United States in City Of Chicago v. Robbin L.Fulton, et. al.:

Whether an entity that is passively retaining possession of property in which a bankruptcy estate has an interest has an affirmative obligation under the Bankruptcy Code’s automatic stay, 11 U.S.C § 362, to return that property to the debtor or trustee immediately up-on the filing of the bankruptcy petition.

A filed bankruptcy petition does 2 things. First, it creates a bankruptcy estate which holds all of the debtor's rights to property, or as the bankruptcy code states, all legal or equitable interests in property. Secondly, an automatic stay automatically operates to automatically stop creditors from collecting debts. including “any act … to exercise control over property of the estate,” referring to the bankruptcy estate. Because this automatically operates, it does not require a court order, and a creditor violating this stay provision may be subject to sanctions.

However, there is a competing code provision providing turnover of property of the bankruptcy estate requires a court order, and is not operate automatically like the automatic stay. An action call an adversarial proceeding has to be filed with the Court requesting the turnover of property. This allows for the debtor to provide a defense. The creditor can also be sanctioned, but only after the Court has ruled.

The Courts are divided. There are five courts of appeals—the Second, Seventh, Eighth, Ninth and Eleventh Circuits—align with the first position of the automatic stay imposing a duty to automatically turn over property, while the Tenth and District of Columbia align with the second position of requiring a court order.

In this case, the City of Chicago lawfully impounded a vehicle because of unpaid fines and penalties after the debtor was caught driving on a suspended license. When the city initially filed its claim, it was filed as unsecured, then amended after confirmation of the Chapter 13 Plan to reflect a secured claim.

So, the question before the Court is fairly straight forward; when must turnover occur? Immediately upon the filing of the bankruptcy petition, or after an adversarial proceeding?

Status of case: Currently awaiting the Court's decision as to whether to it will grant the petition for writ of certiorari.