Coronavirus Crisis: CARES Act Responds To Economic Impact Of COVID-19

The recent stimulus legislation signed by President Trump, provides for greater eligibility for businesses filing under the new subchapter V of Chapter 11 of the Bankruptcy Code. Specifically, within Section 1113 of the CARES Act:

• Amends 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 from $2,725,625 of debt to $7,500,000. The eligibility threshold will return to $2,725,625 after one year.

• Amends 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.

The bankruptcy provisions of the CARES Act listed above sunset within a year.

Additionally, the law provides temporary relief for federal student loan borrowers by requiring the Secretary of Education to defer student loan payments, principal, and interest for 6 months, through September 30, 2020, without penalty to the borrower for all federally owned loans. This provides relief for over 95 percent of student loan borrowers.

* James B. Jameson is Of Counsel at Seltzer, Chadwick, Soefje & Ladik, PLLC. He has more than 35 years of experience representing business clients in the area of bankruptcy law. He can be contacted by telephone at 713.807.1705 or by e-mail at

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