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COVID-19 Bankruptcy Relief Extension Act of 2021:
Any “Relief” for Creditors?

By:         Thomas V. Keough, Partner

On March 27, 2021, Congress passed the COVID-19 Bankruptcy Relief Extension Act of 2021 (“Extension Act”).  The Extension Act extends the temporary changes to the Bankruptcy Code made under the CARES Act. How does the Extension Act affect creditors?
For small business owners who commenced a Chapter 11 bankruptcy after March 27, 2020 (the effective date of the CARES Act), the Extension Act extends through March 27, 2022 the increase provided in the CARES Act to the maximum debt limit from $2.7 million to $7.5 million for debtors seeking protection under the Small Business Reorganization Act of 2019, 11 U.S.C. § 1181 et. seq. (“SBRA”). Therefore, small business owners who commence a Chapter 11 bankruptcy between March 27, 2020 through March 27, 2022 may continue to use the streamlined and less-expensive SBRA so long as their debt does not exceed $7.5 million.
The Extension Act also creates disadvantages to creditors under SBRA, including allowing a debtor to modify an existing mortgage on his primary residence if the debtor took the loan primarily in connection with the small business (11 U.S.C. § 1190(3)). This remedy is not always available under a traditional Chapter 11. Under the Extension Act, this remedy will continue to be available to larger business debtors with larger secured debts.
However, the Extension Act also provides some advantages to creditors under SBRA, including that – unlike in a traditional Chapter 11 – a debtor does not receive a discharge until after he has made all payments under the Chapter 11 plan (11 U.S.C. § 1192). Because of this provision, larger businesses taking advantage of Extension Act now have a greater incentive to comply with the Chapter 11 plan.
For all Chapter 13 plans confirmed prior to the passage of the Extension Act, including cases confirmed between March 27, 2020 and March 26, 2021, the Extension Act extends Chapter 13 debtors’ ability to modify a previously-confirmed repayment plan if those debtors can demonstrate, after notice and a hearing, that they experienced COVID-19 related hardships. Furthermore, under the CARES Act, COVID-19 stimulus payments are not considered “disposable income” received by the debtor for purposes of confirming the Chapter 13 plan (11 U.S.C. § 1325(b)(2)).
Stokes Carmichael & Ernst LLP (“SCE”) has represented creditors in bankruptcy law – as well as in commercial law and collections, business law, employment law, and general civil litigation – for over 49 years. SCE will celebrate its 50th Anniversary in 2022 – a testament to the firm's success and longevity. SCE provides sound legal advice at a reasonable cost and is experienced in representing businesses in a myriad of issues. SCE is rated by “AV® Preeminent®” by Martindale-Hubbell® (the highest rating given by the legal industry’s premier peer-review rating system), reflecting “Preeminent” legal ability and “Very High” general ethical standards. 
If you have questions about your rights as a creditor under the COVID-19 Bankruptcy Relief Extension Act of 2021 or any other bankruptcy law questions regarding your company, please contact SCE at