Congress acts to help struggling families and businesses filing Bankruptcy

Mar 27, 2020

Congress has acted to help struggling North Shore and Greater Boston families and businesses filing – or thinking about – bankruptcy.

 

There are some important changes to the Bankruptcy Code contained in the Coronavirus relief package recently passed by the Senate. The bill is expected to passed by the House and signed into law shortly.

These changes will impact current and future debtors in Bankruptcy cases, including Peabody and North Shore families, individuals and businesses.

Changes for Individuals filing for Bankruptcy or involved in a current Bankruptcy Case:

  1. Changes to Definition of “Income”:

Probably the most important and sensible change in the bill is to exclude Coronavirus relief from the definition of “income” in the Bankruptcy Code.

The amount of “disposable income” is important in determining eligibility for Chapter 7 bankruptcy.

The amount of disposable income also determines how much a debtor may have to pay to creditors in a Chapter 13 Bankruptcy.

This change should ensure that Peabody and North Shore individuals and families will not be penalized by receiving relief payments.

2. Ability to modify some Chapter 13 Plans:

The current maximum length of Chapter 13 Plans is 5 years.

However, the Coronavirus Relief bill allows for some current Chapter 13 plans to extend up to 7 years. This will allow debtors extra time to complete their plans. It may also allow Debtors to lower their Chapter 13 Plan payments.

Changes to Chapter 11 Bankruptcy For Small Businesses:

 

The bill also makes it easier for small businesses who are otherwise eligible for the new Subchapter 5  of Chapter 11.

Chapter 11 has often been the sole option for a business to reorganize under the Bankruptcy Code. However, Chapter 11 is often seen as  expensive, time and labor intensive, and intrusive to small businesses.

Effective as of February 2020, small businesses can now file under Subchapter 5, which is designed to make it easier and less costly to access Chapter 11.

The Debt limit for Subchapter 5 was originally $2,725,625.00  However, under the new bill, that debt limit has increased to $7,500.000.00 for one year.

If you or your small business is struggling due to Coronavirus or for other reasons, please contact us by email, through our website, or by phone at (978) 548-5174.

Our office serves the entire North Shore, Middlesex County, and Greater Boston.

Our initial phone/virtual consultation is free.

 

 

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