CARES ACT Critical Deadline for Small Business Extended
On March 26, 2020, Congress passed bipartisan legislation to extend various Covid-19 bankruptcy relief provisions included in the March 2020 CARES Act. The legislation was designed to extend bankruptcy relief to individuals, families, and small businesses impacted by the pandemic. A critical component of the legislation includes extending the deadline for businesses with debts not exceeding $7.5M to file chapter 11 under the Small Business Reorganization Act of 2019 (“SBRA”). The deadline for small businesses to file under the increased SBRA debt limits was set to expire this March but this legislation extends the deadline to March 27, 2022.
This extension will permit more businesses access (as debt limits are normally $2.7M for SBRA debtors) to the more streamlined and affordable chapter 11 bankruptcy process under the SBRA. Another key provision of the legislation affecting individuals and families is the exclusion of federal Covid-19 relief payments from being treated as “income” for purposes of filing for chapter 7 and chapter 13 bankruptcy relief. The legislation also clarifies that the calculation of disposable income for purposes of chapter 13 plan confirmation does not include consideration of Covid-related relief payments. The legislation also permits chapter 13 debtors to seek payment plan modifications if financial hardship is experienced due to the Covid-19 pandemic.
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