03 Jun Bankruptcy Implications of the CARES ACT
While the CARES Act is commonly being discussed in the news for the stimulus payments going to American families, as well as the relief being offered to businesses struggling to pay their employees, the Act also significantly, although temporarily, amended the Bankruptcy Code.
Small Business Amendments
Temporary, one-year increase of the debt threshold for small businesses eligible to file under the SBRA from $2,725,625 to $7,500,000.
Temporary amendment to definitions applicable and important in Chapter 7 and Chapter 13 cases, which are primarily aimed at ensuring that COVID-19-related payments are excluded from treated as part of the debtor’s income for bankruptcy purposes.
Temporary, one-year amendment allowing Chapter 13 debtors are permitted to seek modifications of confirmed Chapter 13 plans if “the debtor is experiencing or has experienced a material financial hardship due, directly or indirectly, to the coronavirus disease 2019 (COVID-19) pandemic,” and if the debtor meets this burden, he or she would be allowed to extend their plan payments for up to seven years after date the first payment was due under the originally confirmed plan.