We live in extremely unsettling disturbing times. The Covid-19 virus represents a scary public health threat, and the economic damage caused by our stalled economy is likely going to be felt for years to come. Families and businesses are struggling to stay safe and are struggling to pay their mortgages, their rent, their auto loan and lease payments, their utilities, their insurance bills and their medical expenses, not to mention maintaining payments to credit card companies, payday lenders, medical bills, student loan lenders and the like.

My law practice is devoted solely to bankruptcy law, representing consumer debtors in Chapter 7 and Chapter 13 cases here in the Central District Of California, which includes the counties of Los Angeles, Ventura, Santa Barbara, San Luis Obispo, Orange, Riverside and San Bernardino. I have been in practice since 1989, and since 2008 I have been practicing out of my residence in Woodland Hills. Accordingly, the stay-at-home orders issued by Governor Newsom have had negligible direct impact upon my practice. Of course, with a potentially deadly virus going around and a stay-at-home order in place, I strongly encourage meetings be handled by phone, and information transferred by email, fax, mail and/or drop off, rather than in-person for the time being. The Bankruptcy Court has relaxed some of its prior rules, and now allows bankruptcy papers and other filings to be done using e-mailed or faxed signatures, so even the signatures needed to file a bankruptcy can be handled remotely. I continue to be up and running and I'm ready to meet with you by phone to analyze your financial circumstances, outline for you your various bankruptcy and nonbankruptcy options, and make recommendations to you for how best to move forward.

The following are some of what I have observed are the most frequently asked questions related the Covid-19 virus and its impact on our financial lives:

  1. Are mortgage lenders required to postpone foreclosures of California real estate?

    No, but many of the larger mortgage lenders have voluntarily agreed to suspend foreclosures of California real estate temporarily. Don't assume anything! If you are in a pending foreclosure and not in a bankruptcy, check with your mortgage lender to determine whether they are willing to postpone foreclosure. In addition suspension of foreclosure is quite different from suspending the payments themselves that come due during the suspension period.
  2. Are landlords required to postpone evictions in California?

    California has not implemented any such mandates, but many cities and municipalities have implemented restrictions.
  3. Are student loan lenders required to suspend collection activity?

    Federal student loan repayments and collection activity has been suspended for a period of six months. There is no such freeze for private student loans, so best to check with your private student loan company to see whether they have relaxed payment requirements.
  4. If I receive a stimulus payment from the government, will those funds be taken in my pending bankruptcy or my soon-to-be-filed bankruptcy?

    No, you'll get to keep the funds and they will have no adverse impact on your existing or later-filed bankruptcy case.
  5. In light of Governor Newsom's stay-at-home order, can I even file bankruptcy?

    Yes. The bankruptcy courts remain open for business, although they are limiting physical access to the courthouses themselves. Filing of petitions and pleadings has been electronic for a number of years, so we are still able to file as usual. All court hearings are being handled telephonically. The only direct impact of the stay-at-home order is that meetings of creditors, which must be done in-person, are being postponed for the time being.
  6. I'm in a Chapter 13 case, but due to Covid-19 impact, my income has fallen or disappeared altogether. Do I still have to continue making my plan payments to the bankruptcy trustee?

    Yes...but the bankruptcy trustee and the bankruptcy judge are very likely going to be receptive to a motion seeking to modify the plan allowing you to reduce payments, even to $0 a month, for a number of months. It appears that the federal government's stimulus package, also named the CARES Act, will statutorily authorize existing Chapter 13 cases to extend the length of the plan from the prior maximum length of 60 months to a new maximum length of 84 months.
  7. I'm in a Chapter 13 case, but due to Covid-19 impact, my income has fallen or disappeared altogether. Do I still have to continue making my mortgage payments to my mortgage lender?

    Yes. Although some mortgage lenders are indicating that they are suspending foreclosure sales for 60 to 90 days, whether mortgage lenders are also allowing you to not make payments during the suspension period is less than clear. There have been no law changes or mandates at the federal or state level, so the best advice is to contact your mortgage lender and ask what it will and won't allow you to do.
  8. Are bankruptcy trustees likely to seek to dismiss cases if in the final month of my plan, I haven't fulfilled the financial obligations of my Chapter 13 case, i.e., I have a still a few more installments to make?

    Bankruptcy trustees and bankruptcy judges were, prior to the Covid-19 virus, reluctant to dismiss cases in which a debtor has made payments for close to five years but still has more installments to make when month number 60 rolls around. As a result of the Covid-19 virus, it is more likely than ever that bankruptcy judges and bankruptcy trustees will look the other way if when month number 60 rolls around, you still have a few more installments to make to complete your plan. And if push comes to shove, as noted above, the federal stimulus package, CARES Act, allows us to seek a formal extension of the plan for up to twenty-four additional months.
  9. Is the requirement that I provide copies of my annual tax returns and remit to the Chapter 13 trustee my tax refunds over the first $500 still in place?

    Yes. However, if you have suffered a drop in income due to Covid-19, the Chapter 13 trustee is very likely going to be willing to stipulate that as a result of the drop in income, you should not have to turn over your tax refunds.

These are incredibly anxious times for all of us, both from a health and safety perspective, and from an economic perspective. Your highest priority must of course continue to be the health and safety of your family and yourselves, and I urge you to stay safe and healthy. The professionals that make up the bankruptcy system are by no means oblivious to the difficulties that all of us are facing and efforts are being made to provide relief to those most vulnerable. I urge you to hang in there, do the best you can in these trying times, and know that better days are coming...hopefully sooner rather than later.

Jeff Hagen