On March 27, 2020, the President signed into law the Coronavirus Aid, Relief, and Economic Security Act (CARES) Act. Included in the CARES Act are many provisions impacting the bankruptcy system. A year later, on March 21, 2021, the President signed into law an amended version of the Act which expanded provisions in Section 1113 (Bankruptcy) of the CARES Act for one year. These provisions expired on March 27, 2022. As of today, no information extending these provisions has been received. The expiring provisions will affect debtor eligibility in Chapter 11 Subchapter V cases, calculation of “current monthly income” and “disposable income,” Chapter 13 practice, Official Forms, and case management/electronic case filing. Specific changes are as follows:
Chapter 11 Subchapter V Eligibility
- The CARES Act amended the Small Business Reorganization Act of 2019 (SBRA) to increase the eligibility threshold for businesses filing under Subchapter V of Chapter 11 of the U.S. Bankruptcy Code from $2,725,625 of debt to $7,500,000.
- On March 28, 2022, the eligibility threshold returned to $2,725,625.
- Official Form 101 reverted to the Pre-CARES Act version on March 28, 2022.
- Official Form 201 will be updated with the Pre-CARES Act language and adjusted dollar amounts on April 1, 2022.
“Current Monthly Income” and “Disposable Income”
- The CARES Act modified the definition of “current monthly income” for Chapter 7 and Chapter 13 debtors, found in 11 U.S.C. § 101(10A)(B)(ii)(III)(IV) and (V), to exclude payments made in response to COVID-19.
- The modification to “current monthly income” excluded such stimulus payments from inclusion in the 707(b) Means Test for determining eligibility of a debtor to proceed under Chapter 7.
- The modification to “current monthly income” also excluded such stimulus payments from inclusion in the “disposable income” analysis for Chapter 13 debtors seeking to determine the amount of funds required to be committed to their Chapter 13 plan. Thus, the definition of “disposable income” found in 11 U.S.C. § 1325(b)(2) was amended for the life of the CARES Act.
- These provisions altering the methods for determining “current monthly income” and “disposable income” expired on March 27, 2022.
Chapter 13 Practice
- The CARES Act added Subsection (d) to 11 U.S.C. § 1329 to permit a debtor to modify a confirmed plan, after notice and a hearing, if they were experiencing a material financial hardship due, directly or indirectly, to the COVID-19 pandemic. Debtors were given the ability to request a temporary suspension of plan payments and the life of a Chapter 13 plan was temporarily allowed to extend up to seven (7) years after the first payment under the original confirmed plan became due.
- 11 U.S.C. § 1329(d) expired on March 27, 2022.
- The expiring provisions of the CARES Act affect Official Forms 101, 122A-1, 122B-1, and 122C-1. These forms reverted to the Pre-CARES Act versions on March 28, 2022.
- Official Form 201 is affected by the expiring CARES Act provisions and the triennial adjusted dollar amounts that become effective on April 1, 2022. To minimize confusion resulting from two (2) form changes in a short period, Official Form 201 will be updated on April 1, 2022, with the adjusted dollar amounts and the Pre-CARES Act language.
Case Management/Electronic Case Filing (CM/ECF) Events
- Sections 4022 and 4023 of the CARES Act included a provision that allowed borrowers experiencing a financial hardship due, directly or indirectly, to the COVID-19 emergency to request a forbearance on their mortgages.
- The provisions in these sections expired on March 27, 2022.
- On March 28, 2022, the court’s ECF system was modified to deactivate the “Notice of Mortgage Forbearance” event and remove the reference to forbearance from the “Notice of Mortgage Payment Change” event.
- Amended General Order No. 41 – “Adoption of CARES Act Changes to Interim Bankruptcy Rule 1020” terminated on March 27, 2022.
There remains a possibility that these CARES Act provisions could be renewed or extended. The Court will continue to monitor the situation and provide updates.