BANKRUPTCY CORNER
The Sun Has Set on the CARES ACT ’ s Seven Year Chapter 13 Plans
JASON S . RIGOLI
COVID-19 has impacted just about everything , including bankruptcy . For Chapter 13 debtors , one impact was to extend the repayment period from 5-years to 7-years by way of modification of a plan under a newly added subsection ( d ) to 11 U . S . C . § 1329 . 1 11 U . S . C . § 1329 ( d )( 2 ) read : “ A plan modified under paragraph ( 1 ) may not provide for payments over a period that expires more than 7 years after the time that the first payment under the original confirmed plan was due .” 2 Like many CARES Act amendments of the Bankruptcy Code , 11 U . S . C . § 1329 ( d ) was temporary , becoming effective on March 27 , 2020 , and sunsetting one-year later . 3 Congress delayed the sunset one more year to March 27 , 2022 under the COVID-19 Bankruptcy Relief Extension Act 4 , however , Congress took no action with respect to § 1329 ( d ), which has now sunset and been stricken from § 1329 .
On the other hand , 11 U . S . C . § 1329 ( c ) has read :
A plan modified under this section may not provide for payments over a period that expires after the applicable commitment period under section 1325 ( b )( 1 )( B ) after the time that the first payment under the original confirmed plan was due , unless the court , for cause , approves a longer period , but the court may not approve a period that expires after five years after such time . ( emphasis added ).
With subsection ( d ) having sunset , the question posed to Judge Hanan , United State Bankruptcy Court , Eastern District of Wisconsin was : “ Does 11 U . S . C . § 1329 ( c ) foreclose the ability of a Chapter 13 debtor to modify his confirmed plan to alter the plan payment amount while maintaining an extended plan period previously approved under ( now-expired ) 11 U . S . C . § 1329 ( d )?” 5
Judge Hanan , applying the principles of statutory interpretation , found that with subsection ( d ) having been sunset and 11 U . S . C . § 1329 ( c ) is the existing and only operative statutory provision . 6 Therefore , a debtor seeking a modification of a CARES Act extended payment period , would have to comply with the 60-month maximum repayment period . 7 Judge Hanan cited to two opinions by Judge Tucker in the Eastern District of Michigan who reached the same conclusion 8 and distinguished an opinion from Colorado , where the Court granted a modification after the sunset of subsection ( d ) without reverting the plan to 60-months but provided no analysis . 9 Judge Hanan also pointed out that Congress took additional action to make corrections , amendments and extend the sunset date of other CARES Act provisions under the Bankruptcy Threshold Adjustments and Technical Corrections Act 10 , but did not extend subsection ( d ) of § 1329 .
Conclusion
The impact of the sunset is clear from the opinions in Nelson , Sykes , and Bohinski for debtors under the extended plans who are still facing financial difficulties may not be able to amend the plan to lower the amount of their plan payments . Another concern however is for debtors whose financial condition has improved since COVID-19 . The question becomes , in plans where the debtor is required to submit their tax returns annually and there is a substantial increase in income , should a debtor with increased income be required to modify a confirmed plan ? The balance in sch a case is whether the increased income paid over 60-months would be more than the creditors would be paid under the original extended plan .
This article submitted by Jason S . Rigoli , Furr and Cohen , P . A ., 2255 Glades Road , Suite 419A , Boca Raton , FL 33431 , jrigoli @ furrcohen . com
1
CARES Act , Pub . L . No . 116-136 , § 1113 ( b )( 1 )( C ).
2
Id .
3
Id . at §§ 1113 ( b )( 2 )( A )( iii ) and ( B ).
4
Pub . L . No . 117-5 , 134 Stat . 249 .
5
In re Nelson , 2022 Bankr . LEXIS 2884 at * 1 , 2022 WL 6795096 ( Bankr . E . D . Wis . Oct . 11 , 2022 ).
6
Id . at * 14 .
7
Id . at * 26-27 .
8
Id . at * 11-12 ( citing In re Sykes , 638 B . R . 578 ( Bankr . E . D . Mich . 2022 ) and In re Bohinski , 638 B . R . 870 ( Bankr . E . D . Mich . 2022 )).
9
Id . at * 11 ( citing In re Mercer , 640 B . R . 577 , 581 ( Bankr . D . Colo . 2022 )).
10
Nelson , 2022 Bankr . LEXIS 2884 at * 19 ( citing Pub . L . 117- 151 , 136 Stat 1298 ( June 21 , 2022 )).
PBCBA BAR BULLETIN 9
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