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san antonio bankruptcy lawyerThe CARES Act’s March 27, 2021 deadline for excluding pandemic relief payments from the means test was extended by one year to March 27, 2022.

At the beginning of the pandemic, the CARES Act made some helpful temporary changes to consumer bankruptcy law. (See our blog post in March 2020 about this.) Those changes had expiration dates which have now passed. However, in the meantime, Congress passed two other laws which extended the changes. They are still temporary changes. As time passes, these consumer bankruptcy law changes and their new expiration dates continue to be important. Today we focus on one of these changes pertaining to the Chapter 7 means test. 

All Pandemic Relief Payments Excluded as Income for the Means Test

The point of this first change is to prevent the pandemic relief payments from disqualifying people from Chapter 7, “straight bankruptcy.” People could receive and spend their payments without jeopardizing their bankruptcy options. Here’s how it works. 

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The massive $2.2 trillion coronavirus relief law also includes some legal relief for both Chapter 7 and Chapter 13 consumer debtors.

If you’re thinking about filing a Chapter 7 “straight bankruptcy” case, the new CARES law may help, at least slightly. If instead you’re thinking about a Chapter 13 “adjustment of debts” case, the new law helps in more significant ways. That’s also true if you already are in a Chapter 13 case.

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bankruptcyDeclaring bankruptcy can get you out of a less-than-favorable financial situation when you are in need, but your circumstances will dictate which type of bankruptcy you are eligible for and how much the bankruptcy will help you. Once you have figured out that you want to file for bankruptcy, you must then determine when your most opportune time to file is. In certain situations, you may want to delay filing for bankruptcy. Delaying your bankruptcy can sometimes allow you to keep more of your money, protect a friend or family member’s money or even increase your chances of qualifying for a Chapter 7 bankruptcy. Here are a few situations in which you may want to consider delaying filing for bankruptcy.

You Paid Money Owed to a Family Member Too Close to Filing

If you pay certain creditors $600 or more prior to receiving a discharge, your bankruptcy trustee could demand the money back from the creditor. This is called a preference because you have put that creditor in a better position than your other creditors. The preference period for most creditors is 90 days prior to filing for bankruptcy. For “insiders,” such as friends or family members, the preference period is one year prior to filing for bankruptcy.

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bankruptcy-typeIn the United States, there are many different types of bankruptcies, some being for businesses, government sectors or individuals. If you are an individual filing for bankruptcy, the two most common types of bankruptcies that are filed are either Chapter 7, which is a liquidation bankruptcy, or Chapter 13, which is a reorganization bankruptcy. Each type of bankruptcy has its advantages and disadvantages, along with different sets of criteria to qualify for each type of bankruptcy. If you are unable to pay your bills each month or you are struggling to make ends meet, bankruptcy may be in your best interest. Choosing the right type of bankruptcy for your situation can be the key to your financial success.

Chapter 7 Basics

A Chapter 7 bankruptcy is also known as liquidation bankruptcy. This is because all of your “unnecessary” assets will be liquidated to help pay off some of your debts before your debts are forgiven. Most unsecured debts, such as credit card debt, will be discharged in a Chapter 7 bankruptcy, meaning you will no longer be responsible for paying them. It takes roughly three to four months to complete a Chapter 7 bankruptcy, which is a relatively short time frame.

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Do you need a Chapter 13 case? WHEN you file it can mean the difference between a payment plan that takes 3 years and one that takes 5.

In two blog posts last month (November 12 and 19) we showed how filing bankruptcy by the end of December 31 might allow you to file a Chapter 7 “straight bankruptcy” case instead of being forced into a Chapter 13 “adjustment of debts” one. You could have your debts discharged (legally written off) within just 3 or 4 months under Chapter 7. Otherwise you may have to go through a 3-to-5-year payment plan under Chapter 13. Besides likely costing much more, you’d only discharge your remaining debts if you successfully completed your payment plan.

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