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New COVID-19 Relief Package Provides Updates to Bankruptcy Provisions
12/22/2020 04:00 PM Posted by: AIS InfoSource Poster Avatar

December 30th, 2020

New COVID-19 Relief Package Provides Updates to Bankruptcy Provisions


On December 21st, Congressional leaders released the text of the new $900 billion COVID-19 relief package. After pushing back for nearly a week, President Trump signed the bill that addresses several items such as: direct economic-impact payments, jobless aid, a new round of forgivable small business loans and funding for schools and colleges.

In addition, the bill also temporarily amends various sections of the Bankruptcy Code to provide additional relief to businesses and individuals directly impacted by the COVID-19 pandemic.

These provisions, summarized below, ensure that relief payments and mortgage forbearances granted under the CARES Act and future COVID-19 legislation can be properly implemented under the Bankruptcy Code.

Section 2 Amends Section 541 of Title 11
Ensures that federal coronavirus assistance can be used by the families who need relief rather than creditors. It exempts federal coronavirus relief payments from being treated as property of the estate in bankruptcy proceedings. This section is a modification of the CARES Act, which provided that such payments were property of a bankruptcy estate but were shielded from creditors.  This amendment sunsets 1 year after enactment.

Section 3 Amends Section 1328 of Title 11
Ensures that families in Chapter 13 bankruptcy cases who have completed all of their plan payments will not be denied a discharge because they have fallen behind on their mortgage payments during this crisis. It makes clear that a debtor will not be denied a Chapter 13 discharge if the debtor misses 3 or fewer mortgage payments. The mortgage payments would continue to be owed to the home mortgage creditor, but the homeowner would not lose the benefits of a bankruptcy discharge for other debts. This amendment sunsets 1 year after enactment.

Section 4 Amends Section 525 of Title 11
Provides that homeowners in bankruptcy are eligible for mortgage forbearance or other COVID-19 mortgage assistance and further provides that renters are eligible for COVID-19 eviction relief. This amendment sunsets 1 year after enactment.

Section 5 Amends Sections 501 and 502 of Title 11
Sets forth a process for creditors to file a POC for the amount lost during forbearance periods granted under the CARES Act. This amendment sunsets 1 year after enactment.

Section 6 Amends Section 1329 of Title 11
Permits modification of a chapter 13 plan to account for proofs of claim filed pursuant to section 4 above. This amendment sunsets 1 year after enactment.
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