Dealing with Debt: Covid-19’s Effect on Foreclosures, Bankruptcy, and Collections

With the significant and ongoing financial effects from the Covid-19 pandemic taking their toll on individuals and businesses, state and federal courts, lenders, servicers, and agencies have taken steps that directly affect foreclosures, evictions, and bankruptcies in Maine. Below is a brief overview of those changes and how they may impact you or your organization.

This situation is highly fluid, and will be updated with any new information as quickly as possible. For more information, please contact Eaton Peabody’s Bankruptcy & Creditor’s Rights Practice Group Chair Shawn Doil at sdoil@eatonpeabody.com.

CARES Act Amendments: On March 27, 2020, Congress passed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), which contains substantive provisions effecting federally-backed mortgages, federal housing, and bankruptcy. Relevant provisions have been incorporated below.

Maine State Courts, Sheriff Departments, and Registries:

  • Effective March 17, 2020, most deadlines established by Rule in pending civil cases, including deadlines that come into existence after March 17, are extended by 49 days. This does not apply to statutory deadlines.
  • Deadlines to appeal to the Law Court that either began to run or would have expired between March 21 and March 30 are extended to April 20, 2020.
  • Hearings in many civil cases, including Forcible Entry and Detainer, Disclosure, and Foreclosure cases, will not be scheduled or heard before May 15, 2020.
  • All Law Court arguments have been cancelled and appeals scheduled to be argued in April 2020 will be decided on the briefs. No arguments will be held in May 2020.
  • No jury trials will be held in April or May, 2020.
  • Civil service has been suspended or limited in all counties except: Washington, Kennebec, Cumberland, Androscoggin, York, and Franklin (as of March 27, 2020). Those counties may also experience delays in service. Status of civil service in Aroostook County is unknown.
  • All Registries of Deeds are accepting documents for physical recording via drop-off only, and are accepting mail. All counties are accepting electronic recoding except Somerset.

The Emergency Orders can be viewed here.

Foreclosures & Evictions in Maine

  • Effective April 16 until 30 days after termination of the state of emergency:
    • No Writ of Possession based on (1) nonpayment of rent for no more than 2 months; (2) under § 6002’s 30-day notice; or (3) for expiration of lease, shall issue or be served except after review by a judge.
    • 30-day notice under 14 M.R.S. § 6002 extended to 60 days for evictions based solely on nonpayment due to Covid-19.
    • 7-day notice under § 6002(1)(C) extended to 30 days for evictions based solely on nonpayment due to Covid-19.
    • These limitations do NOT apply to evictions based on dangerous, unlawful, or destructive conduct.
    • A Landlord who illegally evicts a tenant is subject to arrest.

The Governor’s Executive Order can be viewed here.

CARES Act provisions related to Foreclosures & Evictions (enacted March 27, 2020):

  • Borrowers with federally-backed residential (1-4 families) mortgages may request up to 360 day forbearance if experiencing hardship due to Covid-19.
  • Borrowers with federally backed multifamily (5 or more families) mortgages may request up to a 90-day forbearance on payments if experiencing hardship due to Covid-19.
  • For 60 days from March 18, 2020, there is a moratorium on initiating any judicial or non-judicial foreclosure, moving for judgment or order of sale, or executing a foreclosure-related eviction or sale on all federally backed residential mortgages (preempts prior Fannie/Freddie moratorium and includes VA and USDA/RD).
  • For 120 days from enactment of the CARES Act, landlords of any mortgaged property backed by HUD, Fannie Mae, Freddie Mac, the rural housing voucher program, or the Violence Against Women Act of 1994 are prohibited from initiating any eviction action or charging late fees, penalties, or other charges to tenants as a result of non-payment of rent. Please contact us directly if you have questions about whether this 120 day moratorium applies to your situation.

Full CARES Act can be seen here.

Federal District Courts:

  • In Federal District Court foreclosures where default has been entered, the Court will be using new Form Orders before issuing default judgments that require plaintiffs to file a motion with all affidavits and documentary evidence necessary to establish entitlement to default judgment, to waive claims for any deficiency judgment, and to obtain consent from all parties-in-interest who have not been defaulted. A copy of the Form Order can be found on the District Court website using the below link.
  • 30 days have been added to all deadlines between March 19 and May 1, 2020. This likely includes deadlines that come into existence after March 19.
  • Existing in-court hearings are continued generally until at least May 1, 2020.
  • All jury trials are continued generally through at least April 20, 2020.
  • Telephonic hearings and conferences will proceed normally.
  • The Federal Courthouses remain open for filing, clerks available via phone or in person via appointment only.

General Orders and information can be found here.

Bankruptcy Courts:

  • Trial, evidentiary hearings continued generally through June 30, 2020. Other hearings will take place as scheduled telephonically. Depending upon the specific circumstances, judges may hold bench trials and evidentiary hearings in person or electronically.
  • All notices must specifically state that the hearing will be TELEPHONIC only.
  • All 341 Meetings in chapter 7, 12 and 13 scheduled through April 10, 2020, are continued to a date to be determined unless scheduled as telephonic.
  • Clerks offices are closed to public for filing; clerks available via email or telephone.
  • The Bankruptcy courts will remain open for filing; hearings may be conducted in person when necessary to avoid immediate and irreparable harm.

General Orders can be found here.

CARES Act Amendments to the Bankruptcy Code (enacted March 27, 2020):

  • Title 11, Chapter 11: Subchapter V eligibility increased from $2,725,625 to $7.5 million (effective for 1 year from enactment of CARES Act).
  • Title 11, Chapter 13: Debtors can modify confirmed plans to last 7 years (up from current maximum of 5 years) if they have had material financial hardship related to Covid-19 (effective for 1 year from enactment of CARES Act).
  • Title 11, Chapter 1: All amounts received pursuant to the CARES Act will be excluded from the current monthly income calculation (the Means Test) and the disposable income calculation for purposes of confirming a plan. Applicable for all cases file before, on, or after the effective date of the CARES Act (effective for 1 year from enactment of CARES Act).

COVID-19 Resources:

CARES Act Summary

Loan Relief Programs

Paycheck Protection for Small Businesses

Dealing with Debt: COVID-19’s Effect on Foreclosures, Bankruptcy, and Collections

Maine Employer Update

Families First Corona Virus Response Act

Tax Advisory Credit

Municipal Response

COVID-19 and the Construction Industry

Delays and the AIA Owner – Contractor Agreements

Essential Businesses – Construction Industry

These materials have been prepared for general informational purposes only and are not intended as legal advice.