The COVID-19 pandemic and the subsequent economic impact has already affected millions of Americans and thousands of renters in Michigan are at risk of homelessness due to inability to pay their rent. Fortunately, tenants are temporarily getting protection from eviction for non-payment of rent under various emergency government measures.

Federal CDC Eviction Moratorium

Because of the unemployment and financial struggles due to the pandemic, there was a statewide ban on housing evictions in Michigan that came into effect on April 1^st 2020. This moratorium on evictions has been extended five times over the course of six months but ends July 31st.

The last Michigan eviction moratorium, which expired on September 1^st, has been extended to December 31^st under the Centers for Disease Control and Prevention (CDC) recent order. The 2^nd stimulus package extends this moratorium until January 31, 2020. The CDC federal moratorium puts a temporary ban on landlords taking action against tenants for non-payment of rent and other utility service charges and was change to July 31st 2021.

So Michigan families who can’t pay rent due to Covid-19 related financial hardships such as layoffs, loss of household income or huge out-of-pocket medical expenses can continue to get protections under this CDC eviction moratorium.

Criteria: Tenants who are seeking relief under the federal moratorium must meet the criteria outlined by the CDC. To qualify for protection, the tenant:

• Must expect to earn no more than $99,000 or $198,000 if filing a joint return in 2020
• Has received an economic stimulus check under the CARES Act@
• Was not required to report any income to the IRS in 2019
• Has sought all available government assistance to make their rental payments

Limitations of Eviction Moratorium

The moratorium looks like a panacea for all problems but this is not true. The most important thing about the eviction moratoriums is that they are temporary and do not forgive or reduce rent payments. This means, unfortunately, the moratorium will not help renters pay rent but it just delays the threat of eviction and there are some loopholes in it that put certain renters at risk of removal.

This federal protection is quickly disappearing and, it is already expired. You are already several months behind on rent and continue to accumulate debt during this period and when this temporary halt of evictions end on December 31, 2020, your landlord may demand payments in full that you’re not made prior to and during the temporary halt.

Without the extension of eviction ban and other federal financial support, many renters could be facing homelessness when the eviction moratorium expires on July 31 (now extended by one more month under the new coronavirus stimulus deal, lasting through January 31, 2021). On top of that, most landlords will not even consider a tenant with a previous eviction record.

Housing is undeniably a basic human necessity and those who are evicted often lose their jobs, possessions, community connections, and even health. If you are depending on the anti-eviction provisions of the CARES Act to protect you from being evicted from where you’re living, then it would make more sense to consider filing for bankruptcy.

Using Chapter 7 Bankruptcy to Stop an Eviction for Rent Arrears

Filing Chapter 7 bankruptcy can put an automatic stay on eviction actions and also prevent the landlord from collecting any past due rent that you owe. You can receive a discharge of past-due rents by filing a Chapter 7 bankruptcy, but you can still be evicted. So if you plan on moving but only looking to get relief from the past due rent you owe, then filing Chapter 7 is the best option for you.

In general, the automatic stay can provide relief to tenants by preventing the landlords from beginning or continuing with eviction proceedings. But in 2005, the bankruptcy law was revised that give landlords more power to evict tenants who file for bankruptcy, despite the automatic stay. There are two situations where bankruptcy will not stop an eviction:

1. The landlord obtains a judgment of possession of the property before the tenant filed for bankruptcy
2. The landlord claims that the tenant is endangering the property or illegally using drugs

Waiting too long to file for bankruptcy can limit your power to retain control over the situation and comes with the consequence of losing your home. So in order to stop an eviction through bankruptcy, it is critical for you to act immediately by filing your case before the landlord gets an order of possession. Please call Firebaugh & Andrews for a free consultation 734-722-2999

The post Chapter 7 Bankruptcy and the Current Eviction Moratorium first appeared on Michigan Bankruptcy Facts 734-722-2999.

The post Chapter 7 Bankruptcy and the Current Eviction Moratorium appeared first on Michigan Bankruptcy Facts 734-722-2999.

A New Albany, Ohio, music school offering piano, guitar and violin lessons racked up under nearly $1 million in loans and $35,000 in credit card debt.

A fine-dining restaurant in Providence, R.I., received more than $450,000 in federal small-business funds to help pay workers but still had to close its doors.

A nonprofit overseeing the Kit Carson Home and Museum in Taos, N.M., welcomes visitors to learn about the famous frontiersman but listed just $17,000 in assets even after every bone-handled knife, buffalo hide apron and flintlock musket had been tallied.

Nearly a year since coronavirus-related shutdowns began affecting large swaths of the American economy, more businesses are filing for bankruptcy as Chapter 11 filings were up nearly 20 percent in 2020 compared with the previous year, court records show.

Data on a subset of businesses ― those registered as corporations ― shows that some sectors are faring much worse than others, with restaurants, retailers, entertainment companies, real estate firms and oil and gas ventures filing for protection in far greater numbers than in previous years, according to New Generation Research.

Bankruptcies filed by entertainment companies in 2020 nearly quadrupled, and filings nearly tripled for oil and gas companies, doubled for computer and software companies and were up 50 percent or more for restaurant owners, real estate companies and retailers, compared with 2019, data from the research firm shows. Among those industries most affected, there were 5,236 Chapter 11 filings in 2019 but 6,917 last year, a tally at least 30 percent higher than any of the previous four years.

Economists are predicting strong economic growth this year overall. But the bankruptcy data show that despite $3.7 trillionin federal stimulus spending to combat the recession triggered by the pandemic, and another $1.9 trillion being proposed by President Biden, businesses in certain industries have become particularly vulnerable and may take years to recover enough to pay their bills. Others will not recover at all.

Other sectors have so far not fared as badly as one might expect, as only 77 hotel or gaming companies filed for protection in 2020, down from 92 in 2019 ― a year when the tourism industry thrived.https://3ac7c9fe1e80353cf95a10043cb8e49b.safeframe.googlesyndication.com/safeframe/1-0-38/html/container.html

Because bankruptcy filings lag other signals of economic distress, experts say the worst may be yet to come. Bankruptcies stemming from the 2007 financial crisis didn’t peak until 2010.

“Bankruptcies don’t cause damage to the economy,” said Ed Flynn, a consultant to the American Bankruptcy Institute. “The damage has already been occurred when the bankruptcy is filed. Higher bankruptcies is more a symptom of economic harm than the cause.”

Michigan-based BarFly Ventures operated three small restaurant chains ― HopCat, Stella’s Lounge and Grand Rapids Brewing ― and had more than a dozen restaurants throughout Michigan and down to Florida at its peak. Although BarFly received $6.6 million in Paycheck Protection Program funds from the Small Business Administration, the company was forced to lay off staff and close some locations permanently, according to filings. It filed for bankruptcy in June.

“BarFly has faced a number of challenges in recent years, including increased industry competition and craft beer saturation,” founder Mark Sellers announced. “However, we were meeting these challenges, and operationally the business was sound until the recent global pandemic pushed us into an unforeseen economic crisis and a 100 percent drop in revenue for almost three months.”

BarFly owed more than $1.7 million to a food provider, according to its bankruptcy filing. Sellers said he hoped the move would “allow us to emerge as a financially stronger company.” In October, BarFly announced it was being purchased by two investment firms.

Restaurants have been one of the hardest-hit sectors on almost every measure during the pandemic, and experts say the worst of the fallout is likely still to come.

If your business needs help reorganizing call us today for your free consultation. 734-722-2999

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Renters generally can’t use bankruptcy to avoid eviction unless they can work out a plan to pay back accrued rent. But for tenants prepared to relinquish their leases, the process can slow an eviction and allow them to get out of paying built-up rent debt. And this feature is expected to grab more tenants’ attention as the federal government’s eviction moratorium is set to expire June 30

Nearly 7 million Americans reported being behind on rent as of late April, according to the U.S. Treasury Department. Some 5 million more renters lacked confidence they could cover upcoming payments.

“Up until the pandemic, past due rent has not really been one of the reasons for people going into bankruptcy.

People don’t typically file bankruptcy to address just a single debt like past due rent, or to delay eviction proceedings. The process doesn’t automatically overturn a landlord’s right to remove delinquent tenants.

More often, it’s used as a last resort for homeowners facing foreclosure or people overwhelmed by a host of different debts.

But the eviction protections established last year at both the federal and state level have helped create a “unique situation” for people who owe more than they can repay and who are able to move. It’s certainly anticipated that filings will increase once those moratoria are no longer in place. Bankruptcy should give delinquent renters the breathing room to move out on their own terms and possibly discharge the debt that has built up, she said.

Difficult Process

Renters who want to keep a residential lease through bankruptcy typically would file Chapter 13 to come up with a multi-year plan that repays past debts over time. But avoiding eviction through bankruptcy can be difficult, attorneys say.

If a landlord already secured an eviction order, a bankrupt tenant who wishes to keep the lease may have only 30 days to get completely caught up on payments, or may be out of luck entirely, depending on the state.

If the bankruptcy precedes the eviction process, a tenant who wishes to keep the lease must have a repayment plan and make timely payments going forward. The larger the amount that’s owed, the harder it is to enter into those types of plans. Despite its shortcomings, bankruptcy could be an attractive option for renters with significant debts that piled up during the pandemic.

Chapter 7 in particular may appeal to struggling renters willing to quickly let go of their leases instead of working out repayment plans, because it allows for a straightforward discharge of debts without a proposal for paying them back. You’ve got this confluence of events that may well lead to the bankruptcy court at some point.

Housing Insecurity

The Centers for Disease Control’s national eviction moratorium, put in place last September to prevent the further spread of Covid-19, is set to expire at the end of the month.

A federal court ruled in May that the moratorium was beyond the CDC’s authority, but the ruling was blocked from taking effect.

With Covid-19 cases declining, the moratorium’s days are numbered regardless of how the courts rule.

Approximately 14% of all renters in the U.S. currently are behind on monthly payments, down from a high of 19% recorded in January, according to National Equity Atlas, a partnership between nonprofit research organization Policy Link and the University of Southern California’s Equity Research Institute. People of color, who have been disproportionately impacted by the pandemic, make up 64% of those behind on rent, according to the data.

Despite the decline, rent delinquency rates are double what they were in 2017, U.S. Census Bureau data show. National Equity Atlas calculates that 54% of delinquent renters are unemployed. And 68% of such renters have lost income during the pandemic, contributing to heightened levels of housing insecurity.

U.S. households behind on rent owe $3,200 on average, and half are behind by three months or more, the organization said.

“Because the moratoria have been going on for so long, people are far behind,” said Edward Boltz, a consumer bankruptcy attorney at the Law Offices of John T. Orcutt.

Government Lifeline

The federal government has appropriated more than $46 billion for rental assistance to avoid an eviction crisis that could result from the end of the moratorium.

“There’s enough money to cover the rent shortfall according to every estimate I’ve seen,” said Eric Dunn, director of litigation at the National Housing Law Project.

But those funds may not forestall an increase in bankruptcy filings for those individuals who accrued debts in other areas in order to stay on top of rent payments, he said.

“I’m confident landlords are going to be made whole” with the federal rental assistance, Dunn said. “I’m less confident this won’t leave people insolvent.”

The post Bankruptcy Spike Expected as Covid Eviction Halt Nears End first appeared on Michigan Bankruptcy Facts 734-722-2999.

The post Bankruptcy Spike Expected as Covid Eviction Halt Nears End appeared first on Michigan Bankruptcy Facts 734-722-2999.