On March 27, 2021, President Biden signed the “COVID-19 Bankruptcy Relief Extension Act of 2021” to extend the expiration dates of certain bankruptcy provisions of the CARES Act to March 27, 2022. The original version of the bill also included provisions to extend the expiration dates of certain bankruptcy provisions in the Consolidated Appropriations Act, this portion of the bill was not included in the final version. This means that Debtors who are in a Ch 13 Plan that was confirmed on March 26, 2021 or prior are eligible to extend their plan out to 84 months. This can enable an eligible debtor to lower the Ch 13 Plan payment.
There must be some relation to a loss of income or earnings due to the economic downturn which occurred as a result of the Coronavirus ( Covid-19) in 2020-2021. A loss of sales, clients, business inventory, loss of employees will also qualify a self employed debtor to have sufficient “Covid-19” related reasons to ask for an extension to up to 84 months.
Most importantly for small businesses is the proposed one-year extension of the increased $7.5 million debt limitation to file a small business chapter 11 case, which is designated as a Chapter 11 Subchapter V small business case. A Subchapter V is usually a better option for a small business bankruptcy reorganization because it is cheaper than a standard Chapter 11. The Debtor in a Subchapter V can proceed in much the same way as a Chapter 13 Debtor; there is usually a standardized Chapter 11 Subchapter V Plan template available in each filing district, and a Trustee is appointed to represent unsecured creditors instead of a creditors committee. This is important because a creditors committee has the power to crush a Chapter 11 Plan by gathering a quorum of creditors to vote against it. When a Subchapter V Trustee is appointed, that power does not exist. The Plan is confirmed pursuant to codified standards, not votes of approval by a creditor majority. Other provisions are primarily consumer in nature and relate to protecting COVID relief payments from creditors and provide additional relief to renters.