Earlier this year, to combat the dramatic economic slowdown caused by the pandemic, Congress passed a wide-ranging economic stimulus package called the CARES Act that included $1,200 payments to tens of millions of Americans.
Some of the law’s provisions can affect those who are considering filing a Chapter 13 bankruptcy and those who have an active Chapter 13.
Yours to keep
Those $1,200 stimulus rebates are not considered income by the court and are not treated as part of the bankruptcy estate. So the money is all yours (including the $500 per child stimulus payment).
The CARES Act also offers debtors the opportunity to extend payments in time of financial hardship. That means you can apply for a three- to a seven-year extension on the agreement you entered into with the court.
A word of caution: the extension is not automatically granted. You must apply for it and be able to demonstrate financial hardship related to the pandemic and a need for an extension. This provision of the law will expire next year on March 27.
Also important: pay no attention to anyone who claims they can garnish your stimulus check. That cannot be done, except in two specific instances: back child support or spousal support (alimony).
It might be time
If you have been considering filing for Chapter 13, this might be a good time to move forward with your plans. By filing now, you will have the opportunity to gain that extension mentioned previously.
The extension would likely make payments easier to make.
No matter when you file for bankruptcy, one of its best benefits is that it slams the brakes on all current collection activities.