COVID-19 Bankruptcy Relief Extension Act: Bankruptcy Provisions Of The 2020 Cares Act Extended

Haynsworth Sinkler Boyd, P.A.

Haynsworth Sinkler Boyd, P.A.

On March 27, 2020, the federal government passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act, providing relief to a wide array of individuals and industries. Included in the CARES Act were certain provisions related to the Bankruptcy Code. Of note, the CARES Act:

  • Amends Section 1182(a)(A) to increase the aggregate debt limit for small businesses filing for relief under Subchapter V of Chapter 11 to $7,500,000 from $2,725,625.
  • Amends the definition of “ income” in Chapters 7 and 13 of the Bankruptcy Code to exclude from monthly income payments made under Federal law relating to COVID-19 and clarifying that disposable income for Chapter 13 plans does not include those payments.
  • Allows for the modification of a Chapter 13 confirmed plan upon the request of the debtor if the debtor is experiencing or has experienced a material financial hardship due to COVID-19.

Upon the scheduled expiration of these CARES provisions, on March 27, 2021, Congress unanimously passed the COVID-19 Bankruptcy Relief Extension Act of 2021. This has extended these provisions an additional year through March 27, 2022.

This extension will allow many small businesses and struggling wage-earning debtors to benefit from enhanced bankruptcy protections during the uncertain business climate brought on from COVID-19. However, it will not change the mechanics of the administration of the affected bankruptcy estates.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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