Can I Still Seek a Bankruptcy Modification Under the CARES Act?

As you might know, the CARES Act, which was passed in response to the COVID-19 pandemic, provided a number of bankruptcy modification options for individuals and small businesses who were struggling as a result of virus-related shutdowns and job losses or work hour reductions. However, those provisions were designed to expire on March 27, 2021. In order to extend the protection and modification options for debtors across the country, U.S. Senator Dick Durbin (D-Illinois) and U.S. Senator Chuck Grassley (R-Iowa) introduced a piece of bipartisan legislation. That legislation, the COVID-19 Bankruptcy Relief Extension Act, would extend protections for individuals and small business owners into March 2022.

What is covered when it comes to consumer bankruptcy, and what protections would be extended if the proposed legislation passes?

Bankruptcy Modifications Under the CARES Act and Proposed COVID-19 Bankruptcy Relief Extension Act

The CARES Act provided some of the following key protections concerning individual and small business bankruptcy protections, and the proposed legislation would extend all of these protections for a year until March 2022:
  • Amends the current definition of “income” for purposes of Chapter 7 bankruptcy and Chapter 13 bankruptcy so that any COVID-19 relief payments are not included as part of a debtor’s income for a determination of bankruptcy eligibility or a determination of exempt and non-exempt property;
  • Makes clear that COVID-19 relief payments should not be considered as part of a debtor’s disposable income for the purpose of confirming a debtor’s Chapter 13 bankruptcy plan;
  • Allows individual and family debtors with existing Chapter 13 bankruptcy cases to eek modifications of payment plans if they are experiencing a financial hardship tied to the COVID-19 pandemic; and
  • Increases maximum debt limit of businesses filing for Chapter 11 bankruptcy.
Learning More About the COVID-19 Bankruptcy Relief Extension Act

In addition to extending provisions under the CARES Act, the proposed legislation would extend certain provisions passed through the COVID relief package from December 2020, which will expire in December 2021, until March 2022:
  • Provides that COVID relief payments are exempt in bankruptcy cases;
  • Ensures that consumers who have completed Chapter 13 plans but have missed no more than three mortgage payments due to COVID-related financial difficulties are still eligible for discharge of other remaining debts;
  • Ensures that consumers who are in the process of a bankruptcy filing are still eligible for mortgage forbearance and eviction moratorium provisions;
  • Allows for the modification of a Chapter 13 bankruptcy plan to take into account creditor proof of claims that have been deferred, and establishes a process for creditor to file a proof of claim for payments that were deferred according to terms outlined in the CARES Act; and
  • Ensures that individuals and families will not be required to provide a security deposit in order to have utility services during a bankruptcy case.
Seek Advice From an Oak Park Consumer Bankruptcy Attorney

If you are struggling with debt during the pandemic, or if you need assistance moving forward with your bankruptcy case or modifying an existing Chapter 13 bankruptcy case, we can help. One of the experienced Oak Park bankruptcy attorneys at our firm can speak with you today about your situation and your options. Contact the Emerson Law Firm to learn more.


See Related Blog Posts:

What Happens If a Creditor Violates the Automatic Stay After a Bankruptcy Filing?

Beware of Student Loan Debt Schemes

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