The COVID-19 pandemic has impacted every area of life, and the legal system isn't an exception. To help citizens and businesses during such a tough time, the U.S. Congress passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act. While set up as a financial stimulus package, the bill also applies changes to various aspects of bankruptcy law. Here's a look at the most important developments. 

How the Pandemic Is Impacting Bankruptcy Law

1. Extends Chapter 13 Plans

Typically, Chapter 13 debtors have a repayment plan that lasts between three and five years. The CARES Act allows current plans to be extended to a seven-year repayment period. The extension is only for cases confirmed prior to March 27, 2020, not new filers. The debtor must also be undergoing hardship related to the pandemic. 

2. Excludes Relief Payments

To qualify for bankruptcy, debtors must meet the government's disposable income requirements. The recent stimulus checks provided qualifying citizens with $1,200 for individuals or $2,400 for married couples, along with $500 for each child.

In normal circumstances, this boost in finances could push households over the current limit, making them ineligible for approval under bankruptcy law. Thankfully, the new bill prevents the stimulus from being counted toward income totals. 

3. Increases Threshold for Businesses

Under the CARES Act, larger businesses filing for bankruptcy may utilize Subchapter V of Chapter 11 bankruptcy. In 2019, the Small Business Reorganization Act introduced the new subchapter to make the bankruptcy reorganization process simpler and more affordable for small businesses. The CARES Act extends eligibility from a maximum of $2,725,625 debt to $7,500,000, which allows larger businesses to take advantage of Subchapter V benefits. 

If you're facing mounting debt, reach out to Ray T. Kennington, Attorney At Law, in Ozark, AL, to learn more about your options. Since 1982, the local attorney has provided legal guidance and representation in matters of bankruptcy law to residents across Dale County. Review the law firm’s practice areas online and request a personalized and socially distanced consultation today at (334) 445-1200.