Changes to Bankruptcy Rules Under the CARES Act

The COVID-19 pandemic has resulted in a few temporary changes to substantive bankruptcy rules under the Federal Coronavirus Aid, Relief, and Economic Security (CARES) Act. These modifications will last for only one year and at this writing, will expire on March 27, 2021. For example, a debtor with a prior Chapter 13 repayment plan can potentially extend the length of his plan to seven years. Approval for this modified plan requires notice and a hearing, at which the debtor must show a material financial hardship resulting from the COVID-19 crisis.

In addition, stimulus checks and other payments under Federal law that are related to the coronavirus will not count as current monthly income for debtors seeking to file under Chapter 7. Further, these payments will not count as disposable income for debtors wanting to file under Chapter 13. Thus, receiving a stimulus check will not affect your eligibility to file under either Chapter 7 or Chapter 13.

Another update relates to 341 hearings.  Debtors who file for bankruptcy under Chapter 7 or Chapter 13 typically need to attend a meeting of creditors under Section 341 of the Bankruptcy Code. Due to fears involving the COVID-19 outbreak, the U.S. Trustee Program now requires that these meetings be conducted by telephone or other forms of remote communication for all bankruptcy cases pending further notice. Bankruptcy courts are continuing to modify their procedures for these meetings, and the use of technology may vary depending on the court and the particular trustee.

We will continue to keep you posted.

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