A question that we regularly hear is “What is the Cares Act” and how can it help me in a bankruptcy case? The Coronavirus Aid Relief and Economic Security Act of 2020 or the CARES Act for short, was a major economic relief package signed by President Trump in 2020 in response to the tremendous economic impact resulting from the COVID-19 Pandemic. The provisions of the Act have now been extended under the Biden Administration and do offer several provisions that apply under the Bankruptcy Law and assist persons in bankruptcy cases. In addition, provisions under the Consolidated Appropriations Act (CAA), also provide relief under the Bankruptcy Law.
Here is a shortlist of the major provisions of the CARES Act and the CAA related to bankruptcy:
1. COVID-related payments, including recovery tax rebates and child tax credit payments, are excluded from current monthly income for means test purposes.
2. COVID-related payments, including recovery tax rebates and child tax credit payments, are not disposable income.
3. Chapter 13 debtors may seek Plan modifications, if the Plan was confirmed before March 27, 2021, and the debtor is experiencing a COVID-related hardship and may extend the Plan payments up to 7 years after the initial payment on the original Plan was due.
4. COVID stimulus payments ( recovery tax rebates) are not the property of the estate.
5. Chapter 13 debtors may seek an early discharge if the debtor has missed three or fewer mortgage payments due to a COVID-related hardship or has entered into a Loan Forbearance or Modification.
6. Debtor who is in pending bankruptcy or has received a discharge cannot be denied a Mortgage forbearance, protection under the Foreclosure and Eviction Moratorium related relief provided under the CARES Act.
7. Debtor may have utility service maintained or restored after filing bankruptcy without paying a deposit, as long as the debtor pays for post-petition service.
Many of the above provisions sunset on December 27, 2021. A few of the provisions expire on March 27, 2022.
Congress has seen the problems that persons in Bankruptcy face and has made a good faith attempt to provide relief in these troubling times. So, it looks like Washington does CARE ( no pun intended) and Bankruptcy may assist many persons facing financial hardships beyond their control.
David Phillips