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Volume XII, Number 338


December 02, 2022

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The CARES Act Provides Additional Relief to Consumer Debtors in Bankruptcy

The Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") was enacted on March 27, 2020. 

The CARES Act provides relief for the widespread economic hardship caused by the coronavirus ("COVID-19").  Along with several changes to Chapter 11 reorganizations of small business debtors, the CARES Act also provides short-term relief to individual debtors under Chapter 7 and Chapter 13 of the Bankruptcy Code.  The changes are temporary and, if not extended, will expire on March 27, 2021. 

The CARES Act will provide many Americans with a one-time payment as an economic stimulus.  In Chapter 7 filings, these stimulus payments will be excluded in calculating current monthly income when determining a debtor's eligibility. Similarly, in Chapter 13 filings, the stimulus payments will be excluded when determining a debtor's disposable income.  The practical effect of these provisions is to prevent the stimulus payments from affecting a debtor's eligibility to file under either chapter.

The CARES Act also provides relief to Chapter 13 debtors operating under a confirmed plan (as of March 27, 2020).  Under the revised Bankruptcy Code provision, the debtor may extend their plan for up to seven years from when the first payment was due under the confirmed plan.  But to qualify for this extension, there must be some "material financial hardship" suffered as a direct or indirect result of COVID-19.  It remains unclear what courts will consider a "material financial hardship" when granting modifications.  But given the extraordinary circumstances caused by COVID-19 to most Americans and the soaring unemployment rates caused by stay-at-home orders, most debtors likely will meet the standard in the court's eyes.

We will continue to monitor the effects of the CARES Act on consumer bankruptcies, and will be ready to advise you on this and other COVID-19 related issues as they develop.  Additional information about how the CARES Act effects Chapter 11 Reorganizations can be found here.

© 2022 Ward and Smith, P.A.. All Rights Reserved.National Law Review, Volume X, Number 98

About this Author

Daniel A. Brader Creditors' Rights and Bankruptcy Attorney Ward and Smith Raleigh, NC
Creditors' Rights and Bankruptcy Attorney

Daniel Brader is ready and willing to help creditors, banks, and financial institutions navigate the legal complexities of the bankruptcy process. In his practice, he represents clients in Chapter 7, 11, and 13 bankruptcy matters involving relief from the automatic stay, objections to proposed bankruptcy plans, and challenges to the valuation of collateral. He defends banks and lenders in debt collection, foreclosure proceedings, and claim and delivery actions.  He additionally defends lenders against claims made under the Equal Credit Opportunity Act (ECOA) and Fair Debt Collection...

Thomas Wolff, Bankruptcy Lawyer, Ward and Smith Law Firm

Thomas regularly handles matters concerning complex bankruptcy cases as well as state and federal court litigation.  Additionally, he has experience overseeing cases throughout the appellate process, including filings with North Carolina Supreme Court and 4th Circuit Court of Appeals. 


  • J.D., North Carolina Central University School of Law, 2017. Valedictorian, Articles and Publications Editor, North Carolina Central University Law Review.
  • Paralegal Certification,...
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