Congress enacted the Cares Act to help Americans that are struggling due to the spread of the Coronavirus (Covid-19). One aspect of the law relates to Chapter 13 Bankruptcies.
Chapter 13 Plans (frequently used to reinstate home mortgages) are limited to 60 months pursuant to the Bankruptcy Code. Under the new law a bankrupt that experiences material financial hardship due to the Coronavirus may extend plan payments over a period of 84 months. This can result in lower, more affordable payments to the Chapter 13 Debtor.
This relief, however, is available only to Chapter 13 Debtors with Chapter 13 Plans that were confirmed (approved by the court) prior to the enactment of the Cares Act. For these debtors the Chapter 13 Plan can be modified up to 84 months.
The Cares Act also impacts the Chapter 7 Means Test. This is a mathematical test that prevents high income individuals from filing Chapter 7 Bankruptcy. This test considers the debtor’s income during the 6 month period prior to filing Chapter 7 (current monthly income). The new law will exclude from current monthly income payments made under the Care Act with respect to Covid-19. This change will help some individuals qualify for Chapter 7 Bankruptcy.
The Law Offices of Todd S. Frankenthal represents bankruptcy debtors in the U.S. District Court For The Southern District Of Florida. It has offices in Fort Lauderdale, Boca Raton, and West Palm Beach.