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New COVID-19 Relief Package Provides Updates to Bankruptcy Provisions

12/22/2020 04:00 PM Posted by: AIS

In addition to stimulus payments, jobless aid, and PPP funding, the new $900 billion COVID-19 relief package also temporarily amends various sections of the Bankruptcy Code to provide further relief to businesses and individuals directly impacted by the pandemic. What bankruptcy provisions are included in the bill?

New COVID-19 Relief Package Provides Updates to Bankruptcy Provisions

On December 21st, Congressional leaders released the text of the new $900 billion COVID-19 relief package. After pushing back for nearly a week, President Trump signed the bill that addresses several items such as: direct economic-impact payments, jobless aid, a new round of forgivable small business loans and funding for schools and colleges.

In addition, the bill also temporarily amends various sections of the Bankruptcy Code to provide additional relief to businesses and individuals directly impacted by the COVID-19 pandemic.

These provisions, summarized below, ensure that relief payments and mortgage forbearances granted under the CARES Act and future COVID-19 legislation can be properly implemented under the Bankruptcy Code.

Section 2 Amends Section 541 of Title 11

Ensures that federal coronavirus assistance can be used by the families who need relief rather than creditors. It exempts federal coronavirus relief payments from being treated as property of the estate in bankruptcy proceedings. This section is a modification of the CARES Act, which provided that such payments were property of a bankruptcy estate but were shielded from creditors. This amendment sunsets 1 year after enactment.

Section 3 Amends Section 1328 of Title 11

Ensures that families in Chapter 13 bankruptcy cases who have completed all of their plan payments will not be denied a discharge because they have fallen behind on their mortgage payments during this crisis. It makes clear that a debtor will not be denied a Chapter 13 discharge if the debtor misses 3 or fewer mortgage payments. The mortgage payments would continue to be owed to the home mortgage creditor, but the homeowner would not lose the benefits of a bankruptcy discharge for other debts. This amendment sunsets 1 year after enactment.

Section 4 Amends Section 525 of Title 11

Provides that homeowners in bankruptcy are eligible for mortgage forbearance or other COVID-19 mortgage assistance and further provides that renters are eligible for COVID-19 eviction relief. This amendment sunsets 1 year after enactment.

Section 5 Amends Sections 501 and 502 of Title 11

Sets forth a process for creditors to file a POC for the amount lost during forbearance periods granted under the CARES Act. This amendment sunsets 1 year after enactment.

Section 6 Amends Section 1329 of Title 11

Permits modification of a chapter 13 plan to account for proofs of claim filed pursuant to section 4 above. This amendment sunsets 1 year after enactment.

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November Bankruptcy Filings Hit 14 Year Low

12/03/2020 09:11 AM Posted by: AIS

NOVEMBER INSIGHT REPORT

November bankruptcy filings totaled 34,470, marking the lowest monthly total in nearly 15 years. The drastic decline in filings can be attributed to stimulus checks, unemployment benefits and mortgage and student loan deferments. Although we observed a decrease in overall filings, our analysis revealed a 40% increase in Chapter 11 when compared to November 2019 data (Figure 1).

Our November analysis of Chapter 7 and Chapter 13 bankruptcies revealed that filings are still well below the monthly averages (Figure 1). Chapter 7 bankruptcies yielded a 29% decrease from the 34,331 filings recorded in November 2019 (Figures 2 & 3). Chapter 13 bankruptcies reflected a 55% decrease from the 21,190 filings in November 2019 (Figures 2 & 3).

Figure 1

Figure 2

Figure 3

October Chapter 11 bankruptcies increased by 40% as compared to November 2019 (Figure 4). Chapter 11 bankruptcies totaled 696 in November 2020 as compared to a total of 498 filings in November 2019 (Figure 4). In our month-over-month analysis, we observed Chapter 11 filings have increased by 13% and Chapter 11, Subchapter V filings have decreased by 12% (Figure 4).

Figure 4

Figure 5

Figure 6

The highest percentage of bankruptcies for September 2020 came from the South (East) (28%) followed by North Central (East) (19%), Pacific (14%), South (West) (14%), Northeast (12%), Mountain (7%) and North Central (West) (6%) regions of the country (Figure 7).

Figure 7

As mentioned in previous months, data confirms that 2020 continues to be an unusual year (Figure 8). A five-year analysis of bankruptcy filings shows a major trend deviation.

Figure 8

The federal moratorium on foreclosures and evictions imposed by the Federal Housing Finance Agency (FHFA) and CARES Act was set to expire on December 31st, 2020. The FHFA recently revealed that they would extend moratoriums on single-family foreclosures and evictions until at least January 31, 2021. Experts believe this will add to the growing backlog of those who would otherwise be forced to file for bankruptcy protection.

To download the full November Insight Report, click here.

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December 30th, 2020

New COVID-19 Relief Package Provides Updates to Bankruptcy Provisions

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