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.

Originally published April 09, 2021

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