Can You Keep Your Stimulus Check If You File For Bankruptcy?

On April 9, 2020, the IRS will start sending stimulus checks to individuals under the Coronavirus Aid, Relief and Economic Security (CARES) Act of 2020. People earning less than $75,000 will receive $1,200 and married couple earning less than $150,000 will receive $2,400. An additional $500 will be paid for each qualifying child under the age of 18. However, if you are considering filing for bankruptcy you may wonder whether or not your stimulus check will have to be forfeited to the bankruptcy trustee.

The short answer to this question is: yes!

With respect to individuals filing for bankruptcy, the CARES Act temporarily amends certain definitions in chapter 7 bankruptcy and chapter 13 bankruptcy cases to exclude COVID-19 related payments from the federal government from being treated as part of the persons income. An example of this would be that the amendments exclude COVID-19 related payments both from the definition of “current monthly income” for the means test- which determines a debtor’s eligibility for Chapter 7 or Chapter 13 bankruptcy.  Additionally, from the calculation of disposable income for purposes of Chapter 13 plan confirmation.

Chapter 13 debtors are also now permitted to seek modifications of their confirmed Chapter 13 plans if “the debtor is experiencing or has experienced a material financial hardship due, directly or indirectly, to the coronavirus disease pandemic.” The modification can be approved after notice and a hearing. Chapter 13 debtors experiencing such hardships are also permitted to extend their plan payments for up to seven years after the time that the first payment under their original confirmed plan was due. These provisions affecting individual debtors also extend until after one year.

If you fall under the guidelines for a stimulus check, you can breathe a sigh of relief that you will be able to hold on to this payment and not have to lose it in a bankruptcy. Bill collectors, garnishments for loans, student loans and the like will also not be able to take it from you. However, there is nothing saying that you can’t spend it on paying down your debt, if you choose.

If you are experiencing financial hardship as a result of the COVID-19 crisis this payment from the federal government should help you in the short term. Amourgis & Associates is your source to help you answer any questions you may have about filing for bankruptcy- both chapter 7 bankruptcy and chapter 13 bankruptcy. We have attorneys all over the state of Ohio that can answer your questions and help you with your finances through these tricky times.

Our offices are equipped to handle cases right now and we understand that your financial needs are ever changing in this uncertain time. We can answer your questions via phone calls, emails, texts, virtual meetings and even snail mail.

The bankruptcy courts are closed to the public temporarily as a result of the COVID-19 virus. The Court has modified filing procedures as a result. Please contact our office to see how your case will be handled going forward. We are still here to serve you and we will be here to serve you in the future! Our clients have trusted us for years to help with their bankruptcies and though there are some changes, we are always going to be your advocate.

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