IN THE COMMUNITY
• Anyone currently in a Chapter 13 payment
plan may seek to modify their plan and
extend their payments for up to seven years
from the date of initial plan payment if
they can demonstrate a material financial
hardship brought on by the coronavirus
pandemic. 4
Although Congress did its best to provide
stimulus checks to consumer debtors, there
is an important loophole for creditors –
the Act is silent as to whether these funds
become property of the estate for the
purposes of Chapters 7 and 13. In other
words, although a consumer debtor does
not have to include her stimulus check in the
calculation of her current monthly income,
the funds may fall under the control of the
bankruptcy trustee, and therefore within the
grasp of her creditors.
Another reason why individuals may not
see their CARES rebate – the IRS has been
tasked with disbursing the funds to each
individual’s bank account (as listed on their
tax filings). If the account is overdrawn,
banks have been keeping those funds
to offset what is owed. Likewise, if an
individual maintains a line of credit with
their bank and that account is overdue,
banks may keep the stimulus check to offset
that overdue amount.
1 U.S.C. § 101 (10A) (B) (ii)
1 U.S.C. § 101 (10A) (B) (ii)
4
1 U.S.C. § 1329 (d) (1)
2
3
For small businesses, it is clear that Congress
underestimated the need for aid. At the time
of the writing of this article, the vast majority
of funds allocated for small business relief
under CARES has been depleted, placing
many small businesses at greater risk for
bankruptcy. Congress is expected to allocate
more funds for small businesses in the
coming days and weeks, but it will likely be
too little, too late for many small businesses.
Despite its shortcomings, the CARES Act
does provide some benefits to debtors.
However, due to its sunset provision, the
benefits under the CARES Act will not
last forever. Bankruptcy practitioners may
consider whether the CARES Act places
their clients in a better position vis-à-vis
bankruptcy filings. But it would be wise to
act quickly.
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1 U.S.C. § 1182 (1)
1
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