Coronavirus (COVID-19): changes to US laws—CARES Act’s Effect on Bankruptcy
Coronavirus (COVID-19): changes to US laws—CARES Act’s Effect on Bankruptcy

The following Restructuring & Insolvency practice note provides comprehensive and up to date legal information covering:

  • Coronavirus (COVID-19): changes to US laws—CARES Act’s Effect on Bankruptcy
  • Change to definition of small business debtor
  • Current monthly income
  • Changes to Chapter 13

On 27 March 2020, the President signed the CARES Act into law. The CARES Act is a stimulus package designed to address the impact of the novel coronavirus (COVID-19) on, among others, individuals, businesses, and hospitals. As part of this design, the CARES Act revises several sections of the Bankruptcy Code to afford relief to small business debtors and individuals that are coping with the coronavirus pandemic and its financial impact. These changes are effective immediately.

Change to definition of small business debtor

The CARES Act makes the small debtor Chapter 11 provisions accessible to a greater number of small businesses. Under the CARES Act, a debtor with aggregate debts up to US$7,500,000 can qualify as a small business debtor—up from US$2,725,625. This amendment applies to all cases filed on or after the enactment of the CARES Act and lasts for one year.

The CARES Act accomplishes this by revising sections 103(i) and 1182 of the Bankruptcy Code. Pre-CARES Act, s 1182 (enacted as part of the Small Business Reorganization Act of 2019) defined the term ‘debtor’ as a ‘small business debtor’. Bankruptcy Code, s 101(51D) contains the definition and requirements for a debtor to qualify as a small business debtor, including, that the debtor’s aggregated debts (the total non-contingent, liquidated secured, and unsecured debts) not exceed US$2,725,625. Pursuant to the CARES Act, s 1182 is

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