COVID-19 has us thinking about our health, but it also has us thinking seriously about our finances. If your debts are piling up and your bills aren’t getting paid, a new federal law may make it easier to go through bankruptcy with the help of a good Chicago bankruptcy attorney.

When the nation “re-opens,” the financial consequences of the pandemic will be long-lasting. Bankruptcy is only one of the options available to Illinois consumers who are facing mounting debts, and it may or may not be the right option for you.

On March 27th, 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was passed by Congress and signed into law by President Trump. This $2 trillion-plus economic relief act is designed to help consumers deal with the economic impact of the pandemic.

How Does The CARES Act Change the Bankruptcy Laws?

The CARES Act makes significant revisions to the U.S. Bankruptcy Code by including new bankruptcy-related provisions that offer relief specifically to individuals, families, and small businesses that are suffering financially as a result of the COVID-19 outbreak.

The CARES Act makes a number of temporary changes to Chapter 7 and Chapter 13 of the U.S. Bankruptcy Code. Listed here are the changes that will affect consumers and families who are filing for bankruptcy:

1. For the purposes of calculating a consumer’s income to determine his or her eligibility for a bankruptcy under Chapter 7 of the Bankruptcy Code, COVID-19-related payments from the federal government (such as the $1,200 stimulus checks) won’t be included.

2. However, when filing under Chapter 13 of the Bankruptcy Code, COVID-19-related payments from the federal government will not be included when determining a consumer’s disposable income for a debt repayment plan.

3. The CARES Act lets consumers who now have a Chapter 13 debt repayment plan revise that plan, including the extension of payments for an additional seven years beyond the original plan’s due date, based on a financial hardship related to the pandemic.

4. These changes are applicable immediately in pending Chapter 7 and Chapter 13 bankruptcy cases and will continue to be applicable for one year from the date of the CARES Act.

5. The CARES Act also temporarily amends (for one year) the Small Business Reorganization Act (SBRA) so that small businesses filing for Chapter 11 bankruptcy with less than $7.5 million of debt may reorganize faster and less expensively.

Before You File for Bankruptcy

Consumers in Illinois should understand that bankruptcy is a last resort – not a first resort. If you are having difficulty paying bills or repaying loans, go to your creditors’ and lenders’ websites first. Many creditors and lenders are posting information to help consumers during the pandemic.

If you can’t make a payment on a loan or a bill, need more time, or need to learn more about payment options, get in touch with your lenders and creditors to explain your circumstances. You can’t ignore an obligation or a bill. Ignoring the problem will only make it more difficult.

Talk to Your Creditors and Lenders

When you speak to a creditor or a lender, be prepared to discuss:

1. your employment and your financial situation
2. the amount that you can actually pay
3. how soon you will be able to make full, on-time payments
4. details regarding your current income, assets, and expenses

Some consumers will need to consult a financial advisor, a credit counselor, or a consumer protection lawyer to help them evaluate and understand their financial options. One of these professionals can probably negotiate on your behalf with your creditors and lenders.

Monitor Your Credit Reports

If your financial situation has been disrupted due to the COVID-19 pandemic, and if you’re seeking help with payments or trying to work with creditors, review your credit reports to ensure that they’re accurate. Your credit reports will be important to your future financial situation.

All three credit report agencies – Equifax, TransUnion, and Experian – provide one free credit report each year on request. Consumers may purchase additional reports for a small fee.

When Should You Consider Bankruptcy?

If you can’t work out a practical arrangement for paying bills and debts, you may need to consider filing for bankruptcy. A good Chicago bankruptcy attorney will carefully review your financial situation before recommending bankruptcy or any other course of action.

For some, bankruptcy may be the only realistic option for resolving debts. For others, an alternative approach may accomplish the same goals with fewer negative consequences. Bankruptcy can eventually give you a fresh financial start, but the process isn’t easy for anyone.

What Does a Chapter 7 Bankruptcy Require?

Not everyone will be eligible to file for bankruptcy under Chapter 7. You must pass a “means test” to qualify for a Chapter 7 bankruptcy. It’s mainly for consumers and families who do not receive enough income to pay their debts.

A Chapter 7 bankruptcy liquidates unsecured debts including medical debts, credit card debt, home foreclosure judgments, and vehicle repossession.

What Does a Chapter 13 Bankruptcy Require?

If you are ineligible to file for bankruptcy under Chapter 7, the option to file under Chapter 13 is still available. A Chapter 13 bankruptcy requires you to create a debt repayment plan, but it also allows you to maintain home ownership and to keep some of your other assets.

A Chapter 7 bankruptcy may appear on your credit record for up to ten years, but a Chapter 13 bankruptcy is usually deleted from a consumer’s credit record in seven years.

There is no reason to fear bankruptcy. If you take that option, at the end of the process, you will be able to start rebuilding your credit and maybe even buy a car or a home.

Bankruptcy Can Give You a Fresh Financial Start

As mentioned previously, bankruptcy is a last resort, but if your debts are overwhelming you, don’t dismiss the bankruptcy option before you have all the facts.

By stopping repossessions and foreclosures, acquiring protection from creditors and debt collectors, and discharging debt, those who file for bankruptcy create a fresh opportunity to set their finances in order.

Talk to a bankruptcy attorney first. Again, bankruptcy may not be your best option for dealing with your debts, but if it is, complicated financial documentation and legal paperwork will be needed, and a simple mistake could be costly. Make sure that you have the right lawyer’s help.