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Cares Act & Chapter 13: Could Your Case Be Affected?

Even if your case has already been filed, the CARES Act may still help you. Many individuals who previously filed and committed to five-year repayment plans, based on the six months of income made prior to filing their respective cases, are now reassessing their finances as a result of the pandemic. Consequently, the court may be able to provide some relief to certain filers.

The language of the CARES Act amends current bankruptcy codes to permit debtors who are experiencing a “material financial hardship” due, “directly or indirectly” to the COVID-19 pandemic, to extend the duration of their court-confirmed plan payments for up to seven years from the initial filing date of their case, rather than the typical five-year limit under Chapter 13 bankruptcy.

New Filings

These changes, as they are written as of the date of this article, do not affect new case filings. Rather, only cases with previously-confirmed plan payments can be modified under the newly minted §1329(d)(1). Therefore, if you’ve read this article and wish to file a Chapter 13 case to set out a seven-year plan, you would not be eligible and you would need to limit your terms of repayment plan to five years.

Unclear Interpretation

In addition to the above-listed limitations of the act, the CARES Act does not carefully define the scope of several key terms. Therefore, it is unclear how courts will interpret key phrases, such as “material financial hardship” or “indirect” hardship. It will take time and future rulings in cases to see which interpretation is being used within your bankruptcy court’s jurisdiction.

This amendment will sunset one year following the bill’s passage on March 27, 2020.

If you believe you qualify for this extension after reading this article, please contact your Yuba City bankruptcy attorney today at 530-797-4402 for more information.

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