As you may know, the President signed the CARES Act late last month. There are numerous provisions in this Act which may impact our clients, but one unusual provision stands out: the ability to extend a Chapter 13 payment plan beyond the statutory limit of 60 months. The Act reads (in part) as follows:
(b) Bankruptcy Relief.—
(1) In general.—
(A) Exclusion from current monthly income.— Section 101(10A)(B)(ii) of title 11, United States Code, is amended—
(i) in subclause (III), by striking “; and” and inserting a semicolon;
(ii) in subclause (IV), by striking the period at the end and inserting “; and”; and
(iii) by adding at the end the following:
“(V) Payments made under Federal law relating to the national emergency declared by the President under the National Emergencies Act (50 U.S.C. 1601 et seq.) with respect to the coronavirus disease 2019 (COVID-19).”.
(B) Confirmation of plan.— Section 1325(b)(2) of title 11, United States Code, is amended by inserting “payments made under Federal law relating to the national emergency declared by the President under the National Emergencies Act (50 U.S.C. 1601 et seq.) with respect to the coronavirus disease 2019 (COVID-19),” after “other than”.
(C) Modification of plan after confirmation.— Section 1329 of title 11, United States Code, is amended by adding at end the following:
“(d)
(1) Subject to paragraph (3), for a plan confirmed prior to the date of enactment of this subsection, the plan may be modified upon the request of the debtor if—
“(A) the debtor is experiencing or has experienced a material financial hardship due, directly or indirectly, to the coronavirus disease 2019 (COVID-19) pandemic; and
“(B) the modification is approved after notice and a hearing.
“(2) A plan modified under paragraph (1) may not provide for payments over a period that expires more than 7 years after the time that the first payment under the original confirmed plan was due.
“(3) Sections 1322(a), 1322(b), 1323(c), and the requirements of section 1325(a) shall apply to any modification under paragraph (1).”.
(D) Applicability.—
(i) The amendments made by subparagraphs (A) and (B) shall apply to any case commenced before, on, or after the date of enactment of this Act.
(ii) The amendment made by subparagraph (C) shall apply to any case for which a plan has been confirmed under section 1325 of title 11, United States Code, before the date of enactment of this Act.
(2) Sunset.—
(A) In general.—
(i) Exclusion from current monthly income.— Section 101(10A)(B)(ii) of title 11, United States Code, is amended—
(I) in subclause (III), by striking the semicolon at the end and inserting “; and”;
(II) in subclause (IV), by striking “; and” and inserting a period; and
(III) by striking subclause (V).
(ii) Confirmation of plan.— Section 1325(b)(2) of title 11, United States Code, is amended by striking “payments made under Federal law relating to the national emergency declared by the President under the National Emergencies Act (50 U.S.C. 1601 et seq.) with respect to the coronavirus disease 2019 (COVID-19),”.
(iii) Modification of plan after confirmation.— Section 1329 of title 11, United States Code, is amended by striking subsection (d).
(B) Effective date.— The amendments made by subparagraph (A) shall take effect on the date that is 1 year after the date of enactment of this Act.
116 P.L. 136, 2020 Enacted H.R. 748, 116 Enacted H.R. 748, 134 Stat. 281, 116 P.L. 136, 2020 Enacted H.R. 748, 116 Enacted H.R. 748, 134 Stat. 281
This law was enacted on March 27, 2020. What does this mean for you? It means that if you receive a stimulus check before or after filing bankruptcy, you can keep it (absent unusual circumstances). It also means that if your Chapter 13 plan was CONFIRMED PRIOR TO March 27, 2020, and you are impacted by the virus, you may be able to extend your plan another two years IF you file the motion before March 27, 2021.
These rules are subject to change by future legislation and, as always, case-specific, so please call us with questions. (219) 865-8376.