The CARES Act Allows Some Chapter 13 Plans to Extend to 7 Years

With a global pandemic griping out country, we are facing unprecedented times and the emergence of a new, abnormal normal. Our children are out of school, our businesses are closing or closed, and we are strongly advised to protect ourselves by remaining isolated in our homes. In order to help preserve the economy during these times, a $2 trillion federal stimulus package was created and signed into law by the President on Friday, March 27.  The CARES Act will sends a $1,200 stimulus check to eligible adults earning up to $75,000 and couples earning up to $150,000 will receive $2,400.  For those people currently receiving unemployment insurance will receive an additional $600 a week for four months.

How the CARES act affects Chapter 13

A small portion of the CARES Act allows Chapter 13 debtors experiencing a material financial hardship stemming from the covid-19 pandemic to modify their confirmed Chapter 13 plans to 84 months (7 years).  With many debtors losing their employment, their Chapter 13 Plan may fall into default.   The ability to extend these plans by up to 24 months will most certainly help debtors who are required to make up this period of non-payments.

However, in order to take advantage of the CARES Act’s ability to propose a 7-year plan, the Plan must be confirmed prior to the enactment of the CARES Act. In other words, the CARES Act does not modify the debtor’s ability to confirm an 7-year plan, even if suffering a from hardships caused by covid-19. Therefore, debtors who are suffering from COVID-19 hardships and has confirmed their plan the day prior to the enactment of the CARES Act could immediately modify their Plan to extend it by 24 months, thereby decreasing their Chapter 13 plan payment by spreading them out over a longer period of time.

If you have questions with your bankruptcy case, contact a Miami Bankruptcy Lawyer today and have a free over the phone consultation regarding your concerns, we’re here to help during these difficult times.

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