The $2 trillion “Coronavirus Aid, Relief and Economic Security Act” (CARES Act), signed into law by President Trump on Friday afternoon. provides financially distressed consumers and small businesses with greater access to bankruptcy relief.
Key bankruptcy provisions within Section 1113 of the CARES Act include:
Amending the Small Business Reorganization Act of 2019 (SBRA) to increase the eligibility threshold for businesses filing under new subchapter V of Chapter 11 of the U.S. Bankruptcy from $2,725,625 of debt to $7,500,000. The eligibility threshold will return to $2,725,625 after one year.
Amending 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.
Clarifying that the calculation of disposable income for purposes of confirming a chapter 13 plan shall not include coronavirus-related payments.
Explicitly permitting 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.
The bankruptcy provisions of the CARES Act listed above will sunset within a year of the legislation being enacted.
Additionally, Section 3513 of the legislative package provides temporary relief for federal student loan borrowers by requiring the Secretary of Education to defer student loan payment, principal and interest, for 6 months, through September 30, 2020, without penalty to the borrower for all federally owned loans. This provides relief for over 95 percent of student loan borrowers.
Rosenerg, Musso & Weiner is learning the details so we can help our clients make the most of a difficult situation.
