Protecting Your $1,200 Stimulus Checks

The Covid-19 pandemic has almost brought the world to a stand-still. People are staying home in a bid to stay safe and comply with orders. Many businesses have closed shop. Here in Minnesota, many employees have been laid off or downscaled, and most people are not guaranteed regular income.

President Trump recently passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The bill provides a $2 trillion aid package to cushion Americans from the ongoing economic decline. Those who qualify for the aid will get checks of up to $1,200.

The stimulus checks are meant to cater to basic needs. To this end, the government has made changes to bankruptcy law to protect the aid money from claims by Creditors.

The dangerous thing, however, is that the Coronavirus stimulus payments are not protected from debt collectors, bank levy, or garnishment outside of bankruptcy.  It seems unfair, but Congress did nothing to stop debt collectors from suing people and then using the judgment they get from suing to freeze peoples’ bank accounts and take the Coronavirus stimulus money.

An effective way to make sure that money doesn’t get taken from you is to file bankruptcy.  As soon as any type of bankruptcy is filed, you get automatic and immediate legal protection from all lawsuits, wage garnishments, and bank account freezes.  This protection is called the automatic stay.

Protecting Individuals

As mentioned, many businesses have closed. The CARES Act has mandated temporary amendments to the Small Business Recognition Act (SBRA) to protect SMEs.

Changes made to the SBRA include upping the filing of debt threshold from $2,725,625 to $7,500,000. This new threshold will hold for one year before reverting to the former limit. The limit expansion, in addition to other changes, will help SMEs in the following ways:

• Simplifying the Chapter 11 plan process
• Disbanding committees of unsecured creditors to cut costs
• Giving SMEs permission to retain equity under some circumstances
• Shortening deadlines in some cases

These changes and their benefits work towards the best interests of SMEs to protect them against creditors now that the pandemic has disrupted business. And, since the SBRA is still new, courts may interpret the law broadly to further work towards SMEs’ best interests.

Protecting Small Businesses

The average American will also be freed of obligations to creditors for as long as the pandemic remains prevalent. The CARES Act has made several temporary amendments to Chapter 7 bankruptcy and Chapter 13 bankruptcy.

Changes to both chapters seek to exclude relief money paid out by the federal government to individuals because of the Covid-19 pandemic from claims by creditors.

Amendments for Income Definitions

The relief money has been taken out of the definition of “current monthly income” under Chapter 7 bankruptcy and Chapter 13 bankruptcy, which means that it cannot be considered when determining a debtor’s eligibility. The money has also been taken out of the definition of “disposable income” under Chapter 13’s plan confirmation.

Amendments for Chapter 13 Payment Plans

In addition to changes made to income definitions, the amendments also allow debtors to request changes to their payment plans under Chapter 13.

According to the new law, “if the debtor is experiencing or has experienced a materials financial hardship due, directly or indirectly, to the coronavirus disease 2019 (Covid-19) pandemic,” they are eligible to make changes to their payment plans.

Before the amendment, debtors were allowed to negotiate payment extension plans for a maximum period of five years. Now, debtors can negotiate extensions for a maximum period of seven years. The amendments also provide for a softer and more lenient stance on the creditor’s part.

These amendments take effect nationwide. For Minnesotans, the new exemptions apply to a range of assistance programs, including:

• Minnesota Family Investment Program
• MinnesotaCare
• Medicare part B premiums
• Medicare part D extra help
• Supplementary Security Income
• County crisis funds
• Energy/fuel assistance and food support
• MFIP Diversionary Work Program

Keep Creditors Away – Ask Walker & Walker How!

Here at Walker & Walker Law Offices, PLLC, we specialize in resolving financial disputes. Debtors and creditors are in unchartered territory brought about by the impacts of the Covid-19 pandemic, but we are on top of developments.

We can keep your relief money safe from creditors and offer a range of supplementary services! Call us to learn more about how we can help. 

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