If you and your Central Valley bankruptcy attorney have decided the best option for you after getting laid off in the midst of the COVID-19 pandemic is to file Chapter 7 bankruptcy, you need to figure out if you qualify. The first step in determining if this chapter is available is to take the means test.
Qualifying for Chapter 7 Bankruptcy After a Layoff
The bankruptcy means test determines whether your income is low enough for you to qualify for Chapter 7 bankruptcy. However, in order to qualify does not mean that you have to be penniless. It just means that your monthly income has to be lower than your expenses, including a high mortgage, credit card payments and car loan payments.
Two exceptions exist to this requirement:
- If your gross income is too high, you might qualify using the second portion of the means test—it allows you to deduct certain expenses.
- If most of your debts are business-related, you will be exempt from the means test.
It is important to know that just because you were laid-off and making significantly less, you will not automatically qualify for Chapter 7 bankruptcy. The means test considers your income over the last six months. In other words, if you were laid off from a high-paying job, you might have to wait several months before filing and qualifying.
COVID-19 Stimulus Proceeds Are Not Considered Income in Bankruptcy
In response to the COVID-19 pandemic, the government passed the CARES Act to provide fast and direct economic assistance for American workers and families, small businesses, and preserve jobs for American industries. However, if you are contemplating filing bankruptcy, you may be concerned that receiving monies under the CARES Act may impact your ability to qualify.
Under Section 1113 of the CARES Act, “…payments made under the Federal law relating to the national emergency declared by the President under the National Emergencies Act…with respect to the coronavirus disease 2019 (COVID-19)…” are not included as part of current monthly income or disposable income when filing for bankruptcy. This temporary change will remain in effect until March 25, 2021.
Call an Experienced Central Valley Bankruptcy Attorney
If you have been impacted by the COVID-19 pandemic and are planning to file or in the midst of a bankruptcy proceeding, it is in your best interest to consult with an experienced bankruptcy attorney to help you learn your legal rights and options, especially with respect to Chapter 7 bankruptcy.