Extension of Chapter 13 Payments Under the CARES Act
With the passage of the Coronavirus Aid, Relief and Economic Security Act (CARES Act) many small businesses and individuals are expected to obtain some financial relief during this time of global pandemic. Interestingly, the CARES Act also makes some very significant changes to the United States Bankruptcy Code.
Chapter 13 Bankruptcy
Chapter 13 bankruptcy is a way for both individuals and businesses to reorganize their debts in such a way that debts are not discharged but rather paid over a longer period of time. Chapter 13 bankruptcy is beneficial to many businesses and individuals as there is no “means test” required as there is in a Chapter 7 bankruptcy, and assets are not required to be sold in order to pay off creditors.
CARES Act and Bankruptcy
The CARES Act has been in the news largely because it affords the opportunity for small business owners to receive loans during this time of a global crisis related to the coronavirus. However, the CARES Act also made some significant changes to Chapter 13 bankruptcy laws.
First, the CARES Act completely excludes any payments made by the CARES Act as income for the basis upon which the court may determine if a bankruptcy plan of reorganization will be allowed.
Next, it permits those debtors who have already filed for Chapter 13 bankruptcy to extend their payments up to 7 years after their initial plan payment was actually due.
These changes to the bankruptcy law will be applicable for one year from the date the CARES Act when into effect.
Bankruptcy During the COVID-19 Crisis
It must be noted that many bankruptcy courts are either not in current operation, or operating with only a few people. Many courthouses are currently closed. If you are considering filing for Chapter 13 bankruptcy, you may find it difficult to file the paperwork or receive answers. In some cases, you may be allowed to drop off paperwork, however, in other cases, you will not be able to go into the courthouse. It is critical that you contact a courthouse before making a trip, as many states and counties currently have shelter-in-place ordinances. If you currently have a Chapter 13 bankruptcy, you may also contact the bankruptcy court to see how they may be handling these cases in light of the CARES Act.
Contact an Experienced Attorney
These are uncertain times. If you are considering filing for bankruptcy, or have already filed for bankruptcy, the legal landscape seems to be rapidly changing. To find help navigating these new and complex challenges, contact the West Palm Beach bankruptcy attorneys at Kelley Fulton Kaplan & Eller today at 561-264-6850 for a consultation, and to help you understand your options during this global pandemic.