The Cares Act seeks to create economic stabilization in numerous ways both for individuals and businesses. This includes some temporary changes in the bankruptcy code.
The Act amends the Small Business Reorganization Act to increase the eligibility threshold to file
under subchapter V of chapter 11 of the U.S. Bankruptcy Code to businesses with less
than $7,500,000 of debt. The increase sunsets after one year and the eligibility threshold
returns to $2,725,625.
Amends the definition of income in the Bankruptcy Code for chapters 7 and 13 to
exclude coronavirus-related payments from the federal government from being treated as
“income” for purposes of filing bankruptcy. Sunsets after one year.
Clarifies that the calculation of disposable income for purposes of confirming a chapter
13 plan shall not include coronavirus-related payments. Sunsets after one year.
Explicitly permits individuals and families currently in chapter 13 to seek payment plan
modifications if they are experiencing a material financial hardship due to the
coronavirus pandemic, including extending their payments for up to seven years after
their initial plan payment was due. Sunsets after one year.
For more information on the bankruptcy and other changes that the servicing industry must be aware of contact Director of Operations, Deborah Gallo, at [email protected]