President Biden signed the “COVID-19 Bankruptcy Relief Extension Act” into law on March 27, 2021. Now, personal and small business bankruptcy relief provisions of last year’s CARES act are extended another year up until March 27, 2022.
Bankruptcy Relief Extensions Greatly Needed Due To COVID-19
These provisions are a great help to those small businesses or individuals either considering or in bankruptcy. The most important provisions of the extended Act as it relates to bankruptcy are the following:
- Broadens the eligibility under the Small Business Reorganization Act (SBRA) for small businesses filing under Subchapter V. The SBRA has made Chapter 11 a more streamlined, debtor favorable and inexpensive process. Our firm helped and obtained confirmations for different businesses and individuals last year. Through March 27, 2022, businesses with debt up to $7,500,000.00 are eligible to file a Subchapter V Chapter 11 case. This is a huge benefit because it expands the debt limits by almost three times. One of the best strategical advantages of the small business chapter 11 is that under the SBRA you do not need an impaired class of creditors voting in favor of your plan.
- Under Chapter 7 and Chapter 13, the definition of “income” is changed to exclude Coronavirus related payments for purposes of filing bankruptcy. This will make many more people eligible for Chapter 7 and allow those filing Chapter 13 to pay less to unsecured creditors through their plans of reorganization.
- Changing the analysis and calculation of disposable income for purposes of confirming a Chapter 13 Plan in that Coronavirus related payments shall not be included. Again, this will allow those filing Chapter 13 to pay less to unsecured creditors through their plans of reorganization.
- Expanding the ability of individuals and families currently in Chapter 13 to seek payment plan modifications beyond the normal 60 months or five years if they can show a material financial hardship caused by Coronavirus Pandemic. Those qualifying can extend their payments for up to seven (7) years after the initial Plan payment was due.
These extensions provide much needed relief to those suffering hardships due to the Covid-19 pandemic. Hats off to Congress and President Biden for moving so quickly on these extensions.