Following Wednesday night’s late-night Senate passage of the Coronavirus Aid, Relief and Economic Security (CARES Act), the bill was sent to the House of Representatives. The House will convene Friday morning at 9:00 a.m. to begin consideration of the CARES Act (H.R. 748).

The CARES Act expands earlier versions of two pieces of legislation to help individuals and businesses harmed by the COVID-19 pandemic.

Notably, within a proposed Section 1113 of the CARES Act, certain bankruptcy code provisions are set to be amended that deal with subchapter V (affecting small businesses), as well as individual Chapter 7 and 13 filers. According to the American Bankruptcy Institute (ABI), some of the key changes include the following, with the first bullet-point being particularly relevant to businesses that have $7.5M or less of debt:

  • Amending the Small Business Reorganization Act of 2019 (SBRA) to increase the eligibility threshold for businesses filing under new subchapter V of Chapter 11 of the U.S. Bankruptcy Code. The eligibility threshold will increase from $2,725,625 of debt to $7,500,000 for one year. The increased debt limit for struggling small businesses to access subchapter V reflects recommendations of ABI’s Commission to Study the Reform of Chapter 11.
  • Amending the definition of “income” in the Bankruptcy Code for chapters 7 and 13, to exclude coronavirus-related payments from the federal government from being treated as “income” for purposes of filing bankruptcy.
  • Clarifying that the calculation of disposable income for purposes of confirming a Chapter 13 plan shall not include coronavirus-related payments.
  • Explicitly permitting individuals and families currently in Chapter 13 to seek payment plan modifications if they are experiencing a material financial hardship due to the coronavirus pandemic, including extending their payments for up to seven years after their initial plan payment was due.