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  • Writer's pictureAaron Mullis

Covid Bankruptcy expansion passed by the House and expected to pass the Senate

Just days before a key deadline, the House voted to extend personal and small business bankruptcy relief provisions that were part of last year's pandemic aid packages through March 2022, Law360 reported. The relief packages raised the maximum debt limit for small businesses using a streamlined bankruptcy process, and allowed individuals to seek COVID-19-related hardship modifications, among other changes. Bankruptcy provisions in the CARES Act are set to expire March 27, while others included in the December relief package have an end date of Dec. 27. House Judiciary Committee Chairman Jerry Nadler, D-N.Y., sponsored the COVID-19 Bankruptcy Relief Extension Act, which would extend certain elements until March 27, 2022. The bipartisan measure passed the House on a 399-14 vote with all opposition coming from Republicans, mostly members of the conservative Freedom Caucus. Rep. Ben Cline of Virginia, the Republican co-sponsor, noted that pandemic lockdowns started just weeks after the Small Business Reorganization Act took effect in February 2020. He said nearly a third of the small businesses entering that streamlined bankruptcy process over the last year would not have been eligible if the CARES Act had not raised the maximum debt limit. The extended measures would prevent COVID-19 relief funds from being counted as income or estate property for the purpose of bankruptcies; allow individuals and families making payments under a chapter 13 plan to seek payment modifications for COVID-19-related hardships; and bar individuals and families in bankruptcy proceedings from being required to put down a deposit to maintain utility services. The bill would also establish that individuals and families in bankruptcy are eligible for CARES Act mortgage forbearance and eviction moratorium provisions, and ensure that families in chapter 13 bankruptcy plans who have made all plan payments but have missed three or fewer mortgage payments can still discharge their debts. The bill now goes to the Senate, where prospects for passage are favorable as Sens. Dick Durbin (D-Ill.) and Charles Grassley (R-Iowa) introduced similar legislation on Feb. 25.

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