The recent passage of new legislation extending provisions of The CARES Act offers hope to those who are struggling in confirmed Chapter 13 bankruptcy cases.
In March of 2020, in response to the COVID-19 pandemic, Congress passed The CARES Act.
Potentially Reduce Chapter 13 Payments and Stretch Out Your Case to 7 Years if Your Case was Confirmed prior to March 27, 2021
This legislation allowed debtors in confirmed (court-approved) Chapter 13 bankruptcy cases to file modifications of their Chapter 13 plans extending the duration of a plan from the usual 5-year maximum to as many 7 years.
However, this provision of The CARES Act contained a sunset provision. That is, this benefit was designed to lapse after just 1 year.
This sunset was drafted into The CARES Act under the presumption that the COVID-19 pandemic would be over no later than 1 year from March, 2020.
As we now see, that is far from the case.
Thus, Congress has now enacted further legislation extending The CARES Act provisions applicable to Chapter 13 bankruptcies for an additional year.
This new legislation is entitled The COVID-19 BK Relief Extension Act of 2021.
Under the original CARES Act, if someone in a confirmed Chapter 13 bankruptcy case prior to the Act’s enactment, that debtor could ask that the Bankruptcy Court to extend his or her Chapter 13 bankruptcy plan to as many as 7 years if he or she could demonstrate the direct or indirect financial effect of COVID-19.
The ability to extend the term of a Chapter 13 payment plan is a highly useful benefit if you are in a Chapter 13 and struggling to pay your monthly necessary expenses due to a reduction in income or employment.
If you are paying $500 per month in a 5-year Chapter 13 payment plan, modifying the plan to a 7-year term could possibly reduce that payment to approximately $347 per month.
Who couldn’t use an extra $150 per month during a pandemic?
Thus, if you are suffering under the weight of a Chapter 13 payment plan that was appropriate to your income and employment status prior to the COVID-19 pandemic but does not fit your current circumstances, it is important to reach out to your bankruptcy lawyer to discuss your situation.
An unaffordable Chapter 13 payment plan is nearly always doomed to fail.
While every court around the U.S. operates with different local practices and procedures, picking up the phone to update your lawyer is the first step toward saving your Chapter 13 bankruptcy case and your entitlement to a discharge and permanent relief from debt.
If you need bankruptcy assistance, please call our Bessemer or Tuscaloosa Bankruptcy office.