COVID-19 Bankruptcy Relief Extension Act Signed into Law
By Max J. Newman, Butzel Long | 04/06/21

On March 27, 2021, President Biden signed into law the COVID-19 Bankruptcy Relief Extension Act of 2021, Pub L No 117-5, 135 Stat 249 (2021). It was a culmination of the bipartisan efforts of Senators Durbin (D-IL) and Grassley (R-IA) to extend key COVID-19 bankruptcy relief provisions under the March 2020 Coronavirus Aid, Relief, and Economic Security Act (CARES Act) from their original March 27, 2021, sunset date to March 27, 2022.

The CARES Act provision that increased the maximum debt threshold for Subchapter V small business debtors from $2,725,625 to $7,500,000 will continue for another year, thus allowing more small businesses to reorganize under the streamlined Chapter 11 procedures.

In addition, the one-year sunset provisions in the CARES Act involving the exclusion of COVID-19-related government payments from the calculation of “current monthly income” in the case of a Chapter 7 debtor and “disposable income” in the case of a Chapter 13 debtor were extended to March 27, 2022, along with the CARES Act provision that gives Chapter 13 debtors experiencing material financial hardship due to COVID-19 the right to modify a Chapter 13 plan to extend plan payments for up to seven years from the date the first payment was due under the original confirmed plan.

The Durbin-Grassley bill, as first introduced, included provisions that sought to extend from December 27, 2021, to March 27, 2022, several bankruptcy relief sunset provisions included in the December 2020 Consolidated Appropriations Act, 2021. These provisions related primarily to Chapter 7 and 13 individual debtors, but also to utility companies (requiring continuing service to the individual debtor without a security deposit) and custom brokers who collect and pay duties to U.S. Customs and Border Protection on behalf of importers who file for bankruptcy (exempting them from the clawback provisions of the Bankruptcy Code). The Senate version of the act, which was the version ultimately signed into law, did not include these provisions.

*This article was co-authored by Thomas Radom.

ICLE Partners
We welcome your comments on this article or topic. Follow this link. Log in with your username and password. Enter your comments at the bottom of the post.