Foreclosures and Evictions During COVID-19 – CARES Act

Update as of March 27, 2020: The Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) was signed in to law on Friday, March 27, 2020. It contains important changes in the Bankruptcy Code aimed at assisting small businesses and consumers. Those changes include the following.

• Amending the Small Business Reorganization Act to increase the eligibility threshold for businesses filing under new subchapter V of chapter 11 (which just became effective February 22, 2020) from $2,725,625 of debt to $7,500,000. The 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. Current law, prior to this amendment, limits the term of a chapter 13 case to five years.

This legislation means that (1) small businesses will have more access to bankruptcy relief, (2) consumers who can demonstrate a financial hardship from the Coronavirus have additional opportunities to cure defaults in existing cases, and (3) the stimulus funds received by consumers will not be counted in determining how debtors must pay creditors in chapter 13 cases.

Hinkle Law Firm will keep abreast of changes that affect our clients’ rights as various government entities react to the pandemic.