Changes to Bankruptcy Law Amid COVID Bills
March 31, 2021
According to a U.S. Census Pulse survey, more than 50% of American households experienced income loss between March 13th and July 21st, 2020, and about 74% of small businesses reported lost revenues between April 26th and May 2nd, 2020. When experiencing financial distress, filing for bankruptcy may be an option to remedy your situation and gain financial relief, but the unprecedented circumstances surrounding COVID-19 and the new laws related to the pandemic may make you feel uncertain.
If you are considering filing for bankruptcy during COVID-19, it is crucial to consult with an experienced Oregon bankruptcy attorney for proper guidance. For more than 16 years, attorney Lyndon Ruhnke has been providing comprehensive legal guidance in debt-related matters to clients going through financial hardship. Lyndon is available to discuss your situation and provide answers to your questions about filing for bankruptcy and how recent laws will affect your filing. With offices in Gresham, Beaverton, and Portland, Lyndon Ruhnke, P.C. is proud to serve clients throughout the state of Oregon.
On March 27, 2021 President Biden signed H.R. 1651 into law. H.R. 1651 extends for one year all of the bankruptcy related provisions from the CARES Act, those provisions now expire on March 27, 2022. The bill allows a debtor in a chapter 13 plan to modify and extend the plan for a term of up to 7 years for covid related economic reasons if necessary. The extension in the bill also allows debtors to be eligble for this relief if the debtors have a confirmed chapter 13 plan on or before March 27, 2021.
The Consolidated Appropriations Act of 2021
The Consolidated Appropriations Act of 2021 was passed into law by Congress on December 27th, 2020. It was established to address certain bankruptcy-related issues that weren’t addressed by the CARES Act. Some key provisions of the legislation include:
The Appropriations Act amends the Bankruptcy Code to specifically state that stimulus payments are not the property of a debtor’s bankruptcy estate.
The Appropriations Act amends the Bankruptcy Code to state that a person may not be denied relief under the CARES Act because they are or were a debtor in a bankruptcy case.
Chapter 13 debtors who defaulted on or after March 13th, 2020, may be granted a discharge based on court discretion.
The Appropriations Act amends the Bankruptcy Code to allow the court to extend a Subchapter V small business debtor’s time to perform their obligations if the debtor is experiencing or has experienced material financial adversity due to COVID-19, be it directly or indirectly.
The Appropriations Act amends the Bankruptcy Code to permit PPP loans to debtors in Chapter 11, 12, and 13 bankruptcy cases.
The Coronavirus Aid, Relief, and Economic Security (CARES) Act was implemented to provide massive support (including a $2 trillion economic stimulus package) to individuals, families, and businesses experiencing financial distress due to the COVID-19 pandemic and reduce the potential wave of bankruptcy filings anticipated as a result of increased unemployment rates. The CARES Act will affect bankruptcy filings in the following ways:
Federal Payments are Excluded From “Income”
Any coronavirus-related payments or stimulus checks received by individuals and businesses from the federal government will be excluded from their “income” when determining eligibility for bankruptcy.
Plan Period Extensions
Individuals and businesses who had their Chapter 13 bankruptcy confirmed before March 27th, 2020, but are going through financial hardship as a result of COVID-19, may be able to modify and extend the repayment period for up to seven years after the first payment was due.
Note: These changes will only be valid until March 27th, 2022.
Small Business Reorganization Act Effect
Under the CARES Act, the maximum allowable debt limit of the Small Business Reorganization Act (SBRA) was increased from $2.7 million to $7.5 million. With the new debt limit, businesses owing up to $7,500,000 in secured and unsecured non-contingent and liquidated debt will be able to reorganize using Subchapter V. These changes will only be valid until March 27th, 2021. but are expected to significantly expand the reach of that act beyond businesses that are covered.
Choose an Experienced Bankruptcy Attorney
According to the United States Bankruptcy Court — District of Oregon, there were 6,303 business and non‐business filings in 2020. These consumers didn’t file for bankruptcy on their own, and neither should you. Especially during these unprecedented times of COVID-19, it is crucial to consult with an experienced bankruptcy attorney for proper guidance and to review your options.
Attorney Lyndon Ruhnke provides relief to individuals in matters of bankruptcy law in times of financial distress. As your legal counsel, he can evaluate your situation and determine which bankruptcy option is right for you. He will also help you file your forms, help with the required documentation, represent you through every step of the legal process, and handle any ongoing creditor harassment.
Lyndon Ruhnke will negotiate with creditors on your behalf to establish an arrangement for your financial circumstances. Using his extensive experience, he will advise you on how to rebuild your credit report, take proper care of your finances, and avoid financial setbacks in the future. He can help you craft a creative solution to suit your unique needs.
Lyndon Ruhnke, P.C. proudly serves clients across Gresham, Beaverton, and Portland, Oregon. Call him today to get the help you need. Call today to schedule a one-on-one consultation with an experienced bankruptcy attorney.