The “COVID-19 Bankruptcy Relief Extension Act of 2021” was signed into law by President Biden on March 27, 2021, extending the key provisions of the COVID-19 Bankruptcy Relief Act which was enacted in the CARES Act for another year.

Section 1113 of the CARES Act, which temporarily amended bankruptcy law to assist individuals and businesses affected by the coronavirus pandemic on March 27, 2020, has been extended by the COVID-19 Bankruptcy Relief Extension Act of 2021 and includes the following provisions:

  • The business debt limit under subchapter V of the Small Business Reorganization Act (SBRA) is increased from $2,725,625 to $7.5 million for another year – until March 27, 2022. This allows small businesses with debts under a certain debt limit to file bankruptcy and reorganize more quickly and less expensively.

Subchapter V was enacted under the SBRA on February 19, 2020, just prior to the COVID-19 pandemic, as a subchapter to Chapter 11.  The purpose was to assist small business debtors in reorganization by reducing expenses and making it faster and easier to file bankruptcy.  Subchapter V is available to a person or entity engaged in commercial business activity with non-contingent liquidated secured and unsecured debts as of the date of the petition filing of originally not more than $2,725,625, in which the majority of such debts have arisen from commercial or business activities of the debtor.

  • The definition of “income” under section 1325(b)(2) for purposes of filing bankruptcy is temporarily amended to exclude coronavirus-related payments received from the federal government until March 27, 2022.
  • The definition of “income” under section 1325(b)(2) for purposes of filing bankruptcy is temporarily amended to exclude coronavirus-related payments received from the federal government until March 27, 2022.
  • In a chapter 13 plan, disposable income shall not include coronavirus-related payments.
  • In a chapter 13, individuals and families who are experiencing material hardships due to the coronavirus pandemic may seek modifications to their plans, including seeking to extend the plan for up to seven years from date of the initial plan payment.

These provisions will sunset, or expire, on March 26, 2022, unless extended again.