The COVID-19 pandemic has affected many aspects of our lives, including everything from our health to the economy. For instance, mandatory quarantine orders have caused many businesses to close their doors, resulting in millions of job losses across the country. Fortunately, those whose employment has been affected by COVID-19 are not without legal recourse, with many people qualifying for Chapter 7 bankruptcy as a way to address their financial situation. Filing for bankruptcy can, however, be a complicated process, especially during this time of uncertainty and change, so if you were recently laid off or lost your job because of COVID-19’s effect on your employer’s business, you should consult with an experienced Chapter 7 bankruptcy lawyer in Iowa who can help give you the best possible chance of success.
Qualifying for Chapter 7 Bankruptcy After a Layoff
Not everyone qualifies for Chapter 7 bankruptcy, as claimants are required to first satisfy what is referred to as a means test. Under this test, a person can only file for Chapter 7 bankruptcy if his or her income, minus living expenses and secured debt payments, is at or below the median income, which in Iowa is around $50,000 for single earners and $68,000 for two income households. It’s important, however, for claimants to remember that just because they have been laid off does not mean that they will automatically satisfy the means test, as bankruptcy courts will look to a person’s income over the prior six months. For this reason, many people who were recently laid off may need to wait for a few months before filing bankruptcy.
There are, however, a couple of exceptions to this rule, which allow claimants who don’t pass the means test to file for bankruptcy. If most of a person’s debts are business-related, for example, he or she could be exempt from the means test, while those whose incomes are too high to qualify, could satisfy the requirements by deducting certain expenses.
The Benefits of Filing for Chapter 7 Bankruptcy
One of the most significant benefits of filing for Chapter 7 bankruptcy is its ability to wipe out certain types of debt, including credit card balances, medical bills, and rent, which are exactly the types of debts that are most likely to get out of hand for those who have been laid because of the pandemic. Specifically, filing for Chapter 7 bankruptcy proceedings is often the best option for those who were recently laid off, as the entire process only takes around four months to complete, allows petitioners to keep the property that they need in order to work and live, and forestalls creditors from pursuing repayment. In exchange, petitioners will be required to sell some of their assets, but are permitted to keep.
- Their home;
- A vehicle valued at least than $7,000;
- Their retirement accounts and pensions;
- Their household goods and furniture valued at less than $10,000;
- Any cash and bank deposits of no more than $1,000; and
- Jewelry worth no more than $2,000.
Once a person’s remaining assets have been sold, his or her unsecured debts will be discharged,
with the exception of overdue payments for alimony and child support, student loan balances, and newly acquired tax debt, which cannot be discharged through bankruptcy.
Set Up an Initial Consultation
If you were recently laid off because of COVID-19, you may be eligible for Chapter 7 bankruptcy. To learn more about whether this could be the right option for you and your family, please call the experienced Chapter 7 bankruptcy lawyers at the Telpner Peterson Law Firm, LLP today. A member of our team can be reached at 712-309-3738 or by online message.