Federal Stimulus Bill Amends Bankruptcy Code Provisions To Allow Greater Access To Bankruptcy Relief For Individuals & Small Businesses Impacted By COVID-19
On March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) which legislation, among other things, gives consumers and businesses experiencing financial distress greater access to bankruptcy relief. The CARES Act amends the recently enacted Small Business Reorganization Act of 2019 (“SBRA”) to expand the definition of “small business”. Specifically, the CARES Act amends section 1182(1) of the Bankruptcy Code so that persons and businesses with not more than $7,500,000 in aggregate non-contingent liquidated secured and unsecured debtors may qualify for relief under the new chapter V of the Bankruptcy Code. Previously, the SBRA only afforded relief to individuals and businesses with not more than $2,725,625 in aggregate non-contingent liquidated secured and unsecured debt. Additionally, the CARES Act amends the Bankruptcy Code’s definition of “income” for chapter 7 and 13 to exclude coronavirus-related payments received from the federal government from being treated as “income” for purposes of a bankruptcy filing. Also amended by the CARES Act is the provision of the Bankruptcy Code governing modification of a chapter 13 plan after confirmation. Now, a chapter 13 debtor may amend his/her plan after confirmation if the debtor is experiencing or has experienced a material financial hardship due, directly or indirectly, to the coronavirus pandemic. These amendments are of limited duration, however, as they are intended to ameliorate the impact of the COVID-19 pandemic, and are set to expire one year from enactment of the CARES Act.
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