The Coronavirus Aid, Relief and Economic Security Act, which was passed by the U.S. Senate yesterday, includes several bankruptcy provisions, according to a press release from the American Bankruptcy Institute.
“Consumers and small businesses in dire need of financial relief due to the COVID-19 coronavirus pandemic will have greater access to the financial fresh start of bankruptcy thanks to this important legislation,” Amy Quackenboss, executive director of the ABI, said. “ABI commends the Senate’s expedited work, and we look forward to swift enactment of this important bipartisan legislation.”
The institute outlined the following specific provisions of the legislation:
- Amending the Small Business Reorganization Act of 2019 (SBRA) to increase the eligibility threshold for businesses filing under new subchapter V of chapter 11 of the U.S. Bankruptcy Code from $2,725,625 of debt to $7.5 million. The eligibility 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.
- Additionally, Sect. 3513 of the legislative package provides temporary relief for federal student loan borrowers by requiring the Secretary of Education to defer student loan payments, principal and interest for six months, through September 30, 2020, without penalty to the borrower for all federally owned loans. This provides relief for more than 95% of student loan borrowers, according to the ABI.
“ABI members are ready to utilize these tools to help consumers and small businesses struggling with overwhelming debts due to the economic fallout of the pandemic,” Quackenboss said.