22 Mar march 27th deadline for expiration of cares act’s increase in subchapter v debt limits heading toward extension
By Mike Dal Lago
A follow up on last week’s post: we are one step closer to a March 2022 extension of the Bankruptcy provisions in the CARES Act that are set to expire later this month. That said, more debtors will be able to take advantage of the benefits provided for under Subchapter V of Chapter 11 (“Subchapter V”). There is a $2,725,625 debt limit for a typical Subchapter V case. However, all bets were off once COVID-19 hit. Realizing that more companies were likely to suffer financial distress during the pandemic, Congress quickly enacted the CARES Act, which increased the Subchapter V debt limit to $7,500,000. Congress did a good job in taking this action, but they were a bit shortsighted. The increased debt limit is scheduled to expire on March 27, 2021 and Congress is now seeking to further extend this deadline for a full year. The COVID-19 Bankruptcy Relief Extension Act (“BREA”), which would ratify this further extension, passed the House on a 399-14 vote. BREA now goes to the Senate, where prospects for passage are favorable as Sens. Dick Durbin (D-Ill.) and Charles Grassley (R-Iowa) introduced similar legislation on Feb. 25 (see my blog from last week).
BREA’s other Bankruptcy related benefits include:
- prevent COVID-19 relief funds from being counted as income or estate property for the purpose of bankruptcies;
- allow individuals and families making payments under a chapter 13 plan to seek payment modifications for COVID-19-related hardships; and,
- bar individuals and families in bankruptcy proceedings from being required to put down a deposit to maintain utility services;
- grant eligibility to individuals and families in bankruptcy for CARES Act mortgage forbearance and eviction moratorium provisions; and,
- ensure that families in chapter 13 bankruptcy plans who have made all plan payments but have missed three or fewer mortgage payments can still discharge their debts.