Unfortunately, the coronavirus pandemic has sent several industries into a tailspin, especially in Nevada.  According to RENO ABC NEWS, as of May 19, 2020, 434,388 unemployment insurance claims have been filed since the week ending March 21, 2020.

Many individuals are either facing unemployment or a significant change in work life that they did not anticipate. Debts that were once manageable have ballooned into uncontrollable burdens. Even with stays on evictions and calls to creditors for relief, it’s possible to find oneself falling deeper and deeper into debt.

In these situations, many find themselves looking to bankruptcy for relief.  Luh & Associates hopes to answer the common questions everyone has, including how Bankruptcy may have changed in this new pandemic environment.

Am I able to file bankruptcy during the quarantine?

Clients are able to proceed with their bankruptcy during this time. The biggest change we’ve seen is in the 341 Meeting with Creditors, which happens approximately thirty days after a client files their petition with the court. Instead of meeting in person, all hearings with the Bankruptcy Trustee (including creditor meeting) are being conducted via videoconference. If a client requires assistance with attending a videoconference meeting, our office is more than happy to facilitate that need. Any trials or evidentiary hearings that must be held in person are currently being continued until after June 30th, 2020. This date is subject to change.

Our office is also committed to client safety and has transitioned to contactless interactions for most of our bankruptcy process. Our initial consultations and bankruptcy intake interviews can now be handled over the phone or via videoconference, and clients can fax or email our office the documents necessary to create petition. We can also utilize a file-sharing service, like Dropbox, for larger documents which may have been delivered through traditional mail. For documents that need to be hand-delivered to our office, we are supplied with masks and hand sanitizer to limit risk and to make our clients feel secure in our environment.

The United States Bankruptcy Court for the District of Nevada has also temporarily suspended the need for an original signature on bankruptcy petitions, meaning fewer necessary visits to our office (Administrative Order 2020-07). This order is subject to change.

How do unemployment benefits affect my ability to file bankruptcy?

Unemployment insurance benefits, with the exception of federal money from the CARES Act and the Federal Pandemic Unemployment Compensation, are treated like income for a Chapter 7 bankruptcy.

A client’s income is based on the six months before the filing date of their petition. This is referred to as the Means Test. We take the total income earned over those six months and divide it by six in order to get the client’s monthly income. This number must be less than the median income figures for a person’s household in order for them to qualify for a Chapter 7 bankruptcy.

In some cases, this may mean a client will have to wait until their monthly median income is low enough to qualify before filing their bankruptcy petition. Please click here to see the median income figures dated May 1, 2020. These figures are subject to change.

Will money from the Federal Pandemic Unemployment Compensation or the nationwide stimulus affect my ability to file bankruptcy?

The CARES (Coronavirus Aid, Relief, and Economic Security) Act has generated many changes in the Bankruptcy code with regards to Chapter 7 and Chapter 13 cases (§1113). Most important is that the income generated from coronavirus-related payments from the federal government is not included when calculating a debtor’s income. This means that, even if a client received both the CARES Act’s federal stimulus and money from the Federal Pandemic Unemployment Compensation, neither of these will push a debtor’s income over the income limit for filing a Chapter 7 bankruptcy.

With regards to a Chapter 13 bankruptcies, federal payments are also not included when calculating a debtor’s disposable income into their repayment plan. The CARES Act also allows a debtor to modify their repayment plan if the debtor has experienced financial hardship due to the pandemic. A debtor may also extend their plan payments for up to seven years after the initial plan payment was due. These new rules only apply to cases that had repayment plans in effect before the enactment of the CARES Act.

These changes are temporary and only applicable for one year after the effective date of the CARES Act. These changes are also applicable to all pending Chapter 7 and Chapter 13 bankruptcy cases.

Can a creditor take my stimulus money or unemployment benefits?

While unemployment benefits are used to determine income, they are exempted from being used to repay debts in Nevada, except in cases where the debt occurred during the period of unemployment. This does not apply to funds from the FPUC or the CARES Act, which includes the nationwide stimulus package.

Once stimulus funds are in a bank account, they can be subject to seizure. Some banks take money from a client’s checking or savings account and apply it towards a debt, such as a loan or a credit card, at that same institution. This is known as a setoff, and a bank can perform this before or after a client files a bankruptcy case.

Sometimes, it is in a client’s best interest to remove funds from their bank account before a setoff can take place. For more information as to whether this step is right for you, please contact our attorneys for a consultation.

Will the bankruptcy trustee ask me to give up money from the CARES Act to my creditors?

When the CARES Act was passed, the federal law had no protections in place to prevent its seizure from creditors. There is currently no Nevada law protecting these specific funds.

There are, however, many bankruptcy exemptions that a Nevada resident (who has lived in the state for more than two years) may utilize during their bankruptcy. One that might help in this case is Nevada’s “wildcard” exemption, that states the following property is exempt from execution: “Any personal property not otherwise exempt from execution pursuant to this subsection belonging to the judgment debtor, including, without limitation, the judgment debtor’s equity in any property, money, stocks, bonds or other funds on deposit with a financial institution, not to exceed $10,000 in total value, to be selected by the judgment debtor.” (NRS §21.090(z))

For additional information on determining whether you qualify for a Chapter 7 bankruptcy, please contact the bankruptcy attorneys at Luh & Associates.  We look forward to answering your questions!