The Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") amended the Bankruptcy Code which will impact businesses that have filed, or may, file for bankruptcy relief. The Small Business Reorganization Act of 2019 ("SBRA") amended Chapter 11 of the Bankruptcy Code to include subchapter V ( the "subchapter"). The subchapter specifically affects small business debtors, both corporations and individuals.
Previously a $2,725,625 debt ceiling existed for filing eligibility under the SBRA. This requirement was relaxed under the CARES Act to increase the debt limitation, for one year, to $7.5 million. The amendment will afford more debtors to qualify for bankruptcy protections under the SBRA.
For individual debtors, CARES Act amends the definition of "income” in the Bankruptcy Code for Chapters 7 and 13 so that coronavirus-related payments from the federal government are excluded from reportable income in a debtor's future bankruptcy filing. Further, these payments will be excluded from the disposable income calculation for Chapter 13 plans. Debtors with Chapter 13 plans pending or in an active plan can apply for modification. Chapter 13 Debtors may now extend their plans for up to seven (7) years, increased from the previous five (5) year maximum extension, after the initial payment due date.
Category: COVID-19 Relief Law
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