On March 27, 2021, President Biden signed the “COVID-19 Bankruptcy Relief Extension Act”. The Legislation will extend personal and small business bankruptcy relief provisions that were part of last year’s CARES Act through March 27, 2022.
Some of the key provisions of the extended Act are the following:
- Increased eligibility for the Small Business Reorganization Act (SBRA) for businesses filing under Subchapter V of Chapter 11. The SBRA makes Chapter 11 a much more streamlined and inexpensive process. Through March 27, 2022, businesses with debt up to $7,500,000.00 are eligible to file a Subchapter V Chapter 11 case.
- Amending the definition of “income” in the Bankruptcy Code for Chapter 7 and 13 Debtors to exclude Coronavirus related payments for purposes of filing bankruptcy.
- Clarifying that the calculation of disposable income for purposes of confirming a Chapter 13 Plan shall not include Coronavirus related payments.
- Explicitly permitting individuals and families currently in Chapter 13 to seek payment plan modifications if they are experiencing a material financial hardship due to the Coronavirus Pandemic, including extending their payments for up to seven (7) years after the initial Plan payment was due.
All experts anticipate continuing financial fallout from the COVID Pandemic. The extended provisions of the CARES Act are intended to make the process smoother for those businesses and families forced to seek protection under the Bankruptcy Code.