COVID Bankruptcy Extension (H.R. 1651)

Summary

Gives small businesses and individuals more time to use special bankruptcy rules created to help them during the COVID-19 pandemic.

What problem does this solve?

Helpful bankruptcy rules from the CARES Act were about to end, even though many people and small businesses still faced money problems from the pandemic. This law extends those helpful rules for another year to prevent financial hardship.

What does this law do?

Extends higher debt limit for small business bankruptcy

Increases the time small businesses can use a higher debt limit to qualify for a faster, cheaper bankruptcy process, extending the period from one year to two years.

Extends relief for individuals in bankruptcy

Allows individuals in Chapter 13 bankruptcy to exclude federal COVID-19 relief payments from their income calculations for an additional year, making it easier to manage their repayment plans.

Allows longer period to modify bankruptcy plans

Gives individuals in Chapter 13 bankruptcy more time to change their repayment plans if they are facing financial hardship because of COVID-19.

Ensures budget rules are followed

Requires that the law's effects on the federal budget are officially recorded to comply with the Pay-As-You-Go Act, which aims to prevent new spending from increasing the deficit.

Who does this affect?

Small businesses facing financial distress
Individuals filing for Chapter 13 bankruptcy

What is the real world impact?

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Prevents a financial cliff for struggling families and businesses

Extends temporary bankruptcy protections to give people and small businesses more time to recover financially from the COVID-19 pandemic, avoiding a sudden end to critical support.

When does this start?

This law takes effect on March 27, 2021, and extends existing bankruptcy relief provisions for an additional year.