On March 27, 2020, The Coronavirus Aid, Relief, and Economic Act (CARES Act) was signed in response to the economic downturn in the United States from the COVID-19 pandemic. The CARES Act had a number of temporary bankruptcy provisions with a specific sunset date as to when the provisions would expire. The sunset provisions were extended for an additional year by the COVID-19 Bankruptcy Relief Extension Act of 2021.
Three specific provisions of the CARES Act are set to expire on March 27, 2022, unless further extended. The first two provisions relate to what is considered income for bankruptcy purposes. COVID-19-related payments, including recovery tax rebates and child tax credit payments, were excluded from current monthly income under the CARES Act. Upon expiration, these payments will be considered as income. The increase in income could provide for a more significant distribution to creditors in a bankruptcy proceeding.
The third provision under the CARES Act that is expiring relates to extending the duration of chapter 13 plans. Under the CARES Act, a chapter 13 debtor could seek a plan modification to extend plan payments up to 84 months after the due date of the initial plan payment. To be eligible, the debtor’s chapter 13 plan must have been confirmed prior to March 27, 2021, and the relief must be sought pursuant to the CARES Act. The debtor must demonstrate that they are experiencing or have experienced material financial hardship due directly or indirectly from COVID-19. Upon the expiration of this provision, the debtor cannot modify their plan to extend beyond 60 months.
Our team is constantly monitoring these updates. If you have any questions, please connect with Geoffrey Peters at any time. For more comprehensive information and insights, read our 2021 Consolidated Appropriations Act Places Limitations on Preference Demands and/or COVID-19 Bankruptcy Relief Extension Act Extends CARES Act Provisions blogs.
This blog is not a solicitation for business and it is not intended to constitute legal advice on specific matters, create an attorney-client relationship or be legally binding in any way.
Three specific provisions of the CARES Act are set to expire on March 27, 2022, unless further extended. The first two provisions relate to what is considered income for bankruptcy purposes. COVID-19-related payments, including recovery tax rebates and child tax credit payments, were excluded from current monthly income under the CARES Act. Upon expiration, these payments will be considered as income. The increase in income could provide for a more significant distribution to creditors in a bankruptcy proceeding.
The third provision under the CARES Act that is expiring relates to extending the duration of chapter 13 plans. Under the CARES Act, a chapter 13 debtor could seek a plan modification to extend plan payments up to 84 months after the due date of the initial plan payment. To be eligible, the debtor’s chapter 13 plan must have been confirmed prior to March 27, 2021, and the relief must be sought pursuant to the CARES Act. The debtor must demonstrate that they are experiencing or have experienced material financial hardship due directly or indirectly from COVID-19. Upon the expiration of this provision, the debtor cannot modify their plan to extend beyond 60 months.
Our team is constantly monitoring these updates. If you have any questions, please connect with Geoffrey Peters at any time. For more comprehensive information and insights, read our 2021 Consolidated Appropriations Act Places Limitations on Preference Demands and/or COVID-19 Bankruptcy Relief Extension Act Extends CARES Act Provisions blogs.
This blog is not a solicitation for business and it is not intended to constitute legal advice on specific matters, create an attorney-client relationship or be legally binding in any way.
