On Saturday, President Joe Biden signed the COVID-19 Bankruptcy Relief Extension Act into law to extend provisions providing financially distressed consumers and small businesses greater access to bankruptcy relief.

The legislation will extend personal and small business bankruptcy relief provisions that were part of last year’s CARES Act through March 27, 2022. Some of the key provisions of last year’s relief packages were the increased debt limit to $7.5 million for small business debtors electing to file under subchapter V and the allowance for individuals to seek COVID-19–related hardship modifications, among other changes.

With the CARES Act bankruptcy provisions originally due to sunset on March 27, the House of Representatives passed the Senate-amended version of H.R. 1651, the COVID-19 Bankruptcy Relief Extension Act of 2021, which passed by unanimous consent in the Senate last Wednesday. The Senate struck a provision from the original bill that would have extended the bankruptcy provisions of December’s Consolidated Appropriations Act of 2021 (CAA) that are due to sunset on Dec. 27.

“While the economic strains of the COVID-19 pandemic linger, these important extensions provide another year of enhanced bankruptcy protections for struggling small businesses and consumers,” Amy Quackenboss, executive director of the American Bankruptcy Institute, said. “ABI appreciates the prompt efforts of Congress and the administration to ensure that households and small businesses continue to have greater access to the financial fresh start of bankruptcy.”

Key bankruptcy provisions extended to 2022 by the COVID-19 Bankruptcy Relief Extension Act include:

• The increased eligibility threshold of the Small Business Reorganization Act of 2019 (SBRA) for businesses filing under subchapter V of Chapter 11 of the U.S. Bankruptcy Code from $2,725,625 of debt to $7.5 million. The increased debt limit for struggling small businesses to access subchapter V reflects recommendations of the ABI’s Commission to Study the Reform of Chapter 11.
• 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.

“Our members will continue utilizing these tools to help consumers and small businesses struggling with overwhelming debts due to the economic fallout of the pandemic,” Quackenboss said.