COVID-19 and the Bankruptcy Code

In response to the COVID-19 pandemic, President Donald J. Trump signed into law the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) to provide a $2 trillion economic stimulus package to support U.S. businesses and individuals impacted by COVID-19. The CARES Act includes revisions to certain provisions under Chapters 7 and 13 of the U.S. Bankruptcy Code which, for consumers who will be or have been financially harmed by the COVID-19 pandemic, equate to greater bankruptcy benefits and protections.  The key changes that consumers should be aware of are as follows:

– Chapter 13 debtors with existing confirmed plans who have suffered a “material financial hardship” due to COVID-19 will be allowed to seek plan modifications, including extending their payments for up to seven years after their first plan payment was due, thereby reducing their monthly payment obligation.
– Coronavirus related payments received by families and individuals from the federal government, as a result of the CARES Act and other stimulus, will not be included in the definition of “income” for eligibility purposes, nor will such payments be included in the calculation of “disposable income” for plan confirmation purposes. This change is designed to permit consumer debtors to receive the full benefit of stimulus payments.

If you are currently a bankruptcy debtor or creditor, or are an individual or small business considering filing for bankruptcy, please contact our office for assistance and to schedule a free initial phone consultation.