Authors: Andrew M. Thaler & Spiros Avramidis
- For filings under Subchapter V of Chapter 11 the eligibility threshold is increased from $2,727,625 to $7,500,000 for one year. Interestingly, there is no requirement that the debt relates to COVID-19 impact. Subchapter V is a new, less expensive, streamlined version of Chapter 11 which went into effect in February 2020.
- Coronavirus related payments from the federal government will not be treated as income for purposes of determining eligibility to file chapter 7 bankruptcy or the amount to be paid in chapter 13 plans. In rare circumstances, payments received from the Government in connection with COVID-19 may have made a debtor ineligible to quality for a chapter 7 in absence of this change.
- People presently in chapter 13 will be allowed to seek payment plan modifications if they are experiencing material financial hardship due to the Coronavirus, including extending payment for up to 7 years after their initial plan payment was due. Currently plans cannot exceed 5 years.
However, the above forms of relief have a limited life and are set to expire on March 26, 2021. Although not directly related to bankruptcy, the CARES act also defers federal student loan payments for 6 months with no penalties to the borrower.