COVID-19 Bankruptcy FAQs

Frequently Asked Questions

1. Can I file for bankruptcy even though I cannot leave my house because of COVID-19?

Yes.  Illinois has extended the statewide stay-at-home order through May.  However, deadlines for bankruptcy court mostly remain changed.  You can file your bankruptcy case and sign your documents electronically, so you do not have to leave your house as long as you can complete these tasks from home.  Additionally, if you need to leave your home because of a court case, this is generally considered essential travel.

2. What should I be expecting if I need to visit the court during COVID-19 pandemic?

The United States Bankruptcy Court for the Northern District of Illinois is currently open.  However, all hearings, calls, and motions are currently set to occur telephonically, per an amended emergency order.  Many cases are being delayed until the public emergency subsides.  If you do have to attend a court hearing, it will probably be through telephone and your lawyer can represent you.  The judge can order you to appear in person if he or she feels it is necessary.

3. How may coronavirus impact my bankruptcy filing?

Coronavirus should not have much impact on your bankruptcy filing.  The bankruptcy court is still open and accepting new filings.  However, to ensure your safety and that of our staff, we are preparing filings electronically and will send you documents that you can sign by hand or electronically for easier processing.

4. The massive $2.2 trillion coronavirus relief law includes some legal relief for Chapter 7 and Chapter 13 consumer debtors.  What does this include?

Eligible debtors who do not exceed income limits may receive a one-time economic stimulus payment of $1,200 if they are single or $2,400 if they are married, plus $500 for each of their children under the age of 16.  This payment is not to be included in their assets or income when calculating their income when filing for bankruptcy.  There is also a 60-day moratorium on foreclosures from mortgages backed by the FHA.  All federal student loans have also been placed in an automatic administrative forbearance with a 0% rate for six months.

5. How will the CARES Act affect bankruptcy cases?

The CARES Act excludes coronavirus-related payments from the federal government as part of the calculation to determine a debtor’s income for eligibility under Chapter 7 or Chapter 13 bankruptcy or for the debtor’s disposable income for a Chapter 13 reorganization plan.  Chapter 13 debtors who already confirmed their plan can modify the plan due to a material financial hardship that the pandemic caused.  This may include making your first payment seven years after the original plan’s initial payment date. These changes apply to new and pending cases and will apply until March 26, 2021.

6. How is bankruptcy affected during the time of coronavirus?

Coronavirus has had a major economic impact on individuals and businesses, so you can expect that there will be more bankruptcy cases, which can slow down your case.  Your case may be postponed.  Any motions or hearings will likely take place over the phone.  The automatic stay will remain in effect while your bankruptcy case is pending.  Additionally, more small businesses will be eligible to file bankruptcy.

7. Stimulus checks – what do they mean for my bankruptcy case?

If you have already spent your stimulus check, the bankruptcy trustee will probably not try to go after it.  If you used it for necessities like paying your rent or mortgage, try to keep records to show this in case this issue comes up.  Once you file for bankruptcy, all of your assets are considered part of the bankruptcy estate unless they are exempt.  I can analyze your particular situation to determine if an exception for your stimulus check exists or if you should wait to file until after you have used your stimulus payment.

8. What happens to lawsuits in a bankruptcy case?

If a creditor is engaging in collection activity or suing you, the bankruptcy’s automatic stay may prevent further action until your bankruptcy case is resolved.  The underlying debt may be included in your bankruptcy case.  If you have a legal action that is pending against someone else when you file bankruptcy, any proceeds you receive from the lawsuit may be considered part of your bankruptcy estate, but there are exceptions.  I can discuss this information with you during a confidential consultation.