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About Bankruptcy and COVID-19

Money & Debt

This article was written by Texas Legal Services Center. It was last updated on April 8, 2020. It also includes content written by Lone Star Legal Aid.





How are bankruptcy courts handling creditor meetings and hearings?

Each federal district bankruptcy court has issued its own orders governing creditor meetings and how to conduct hearings.The best practice would be to visit the district bankruptcy court website where your matter is pending to find orders governing procedure during the COVID-19 situation. 

In general, each district bankruptcy court has addressed the continuance of meetings of creditors and for the conduct of hearings telephonically, removing a local rule requiring prior court permission. Texas' Southern District Bankruptcy Court was the first to roll out comprehensive orders, which can be found here. Each division within each district would be subject to the Bankruptcy District Court Order. 

For help navigating the bankruptcy courts, talk to a lawyer who practices bankruptcy law in your jurisdiction. For help finding one, use TexasLawHelp's Legal Help Finder or contact a lawyer referral service

I can't make my payments under a Chapter 13 plan for COVID-19 related reasons.

It is unclear if Chapter 13 trustees will act when debtors start missing plan payments. It is generally possible that the trustees will not be as quick to file a motion to dismiss for nonpayment.

The Southern District of Texas' bankruptcy court's order GO 2020-07 provides a way for debtors to ask to temporarily reduce their Chapter 13 plan payments. 

How are Chapter 13 conduit plans being handled during COVID-19?

A conduit plan payment has the trustee collect the mortgage payment from the debtor. The trustee then pays the mortgage company.

The Eastern District does not feature a conduit plan, but all other bankruptcy districts om Texas have adopted the conduit mortgage procedure. Generally, there is one standing chapter 13 Trustee appointed by the U.S. Trustee to handle each bankruptcy division of each District (the Northern District of Texas—Fort Worth Division is an exception because it has two trustees).

Each trustee has its own policy for handling increases and decreases in mortgage payment as it affects the plan payment.

To date, there have been no announcements concerning whether COVID mortgage payment forbearance relief will be honored by the trustee.

Can I get mortgage relief?

Whether a mortgagor (that is, the borrower) is entitled to forbearance relief depends on the owner of the mortgage and servicer handling. VA guaranteed loans are eligible for up to 12 months forbearance, for example. See the Consumer Finance Protection Bureau's Guide to coronavirus mortgage relief options.

Do I still have to sign documents in person or go to bankruptcy court in person?

Courts have also relaxed the need for “wet signatures” to be produced to Court. The courts may begin looking at future procedures to allow traceable digital signatures to establish a debtor’s original signature in filing declarations, signatures under oath, and all other signatures on court required documents in an attempt to avoid handling paper.

What if I was in the middle of a bankruptcy case before the virus closed everything down?

All 341 Meetings of Creditors have been continued until May 1, 2020, in the U.S. Bankruptcy Court for the Southern District of Texas. Contact your attorney if you have questions about this. See Special Order H-2020-6If you are in a Chapter 13 play, play payment reductions are available. Also, the court is now accepting electronic signatures so that cases can continue moving forward through the use of technology. See General Order 2020-7

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