Bankruptcy and the "Consolidated Appropriations Act"
Written by: Philip Sasser
When the first stimulus package (aka The CARES Act) was passed in March 2020, the part most people focused on was how much money they were going to get – responses generally falling into the categories of either “oh, that’s nice, I could use a bigger television” or “are you kidding me, I just lost my job and you think a $1,200 check is going to make a difference?”
But tucked into that massive bill were provisions that affected lots of industries and professions in unique ways that wouldn’t have really made a difference to you unless you were in one of those industries. There was probably something in it that affected shipbuilders and something else that affected nannies and something else that affected the nannies of shipbuilders’ children… You get the point.
The bankruptcy industry was no different and, in fact, because bankruptcy filings are often closely related to economic volatility, there was quite a lot. Of greatest significance to our clients was the lengthening, in certain circumstances, of Chapter 13 plans from sixty months to eighty-four months. Cool, huh?
When the text of the still-not-yet-signed second stimulus bill (officially “Consolidated Appropriations Act, 2021″) hit our desks we did what we did the first time – looked to see if we were going to get a check and then looked to see if there were any a la carte bankruptcy items that might help our clients. Turns out, there is. But it’s weird. Really weird.
In short, for the next year, an early discharge of all debts dischargeable under 1328 may be granted to a debtor who:
- Is in Chapter 13 bankruptcy
- Has a residential mortgage
- Has not defaulted on the payments on that mortgage more than three times since 3/13/20
What if you’re in Chapter 13 bankruptcy rather than Chapter 7 bankruptcy because you have disposable income? What if you’re in chapter 13 rather than Chapter 7 because you have non-exempt assets? What if you filed a Chapter 13 case because you had obtained a discharge in Chapter 7 within the last four years?
The basic reading of the bill suggests that you can conclude your case early, without additional payments, and move on with your life.
Because it is such a strange piece of legislation that appears, at least in this instance, to quite explicitly favor middle and upper-middle-class debtors (homeowners who haven’t defaulted more than three times since 3/13/20), it’s my belief that a great deal of emphasis will be placed on the “may” language of the statute. The early discharge is discretionary on the part of the court. Go ahead and make the argument, but I think it is likely that the cases where debtors almost qualified for Chapter 7 or the cases where debtors are clearly struggling as a direct result of COVID-19 and would benefit from an early discharge will be favored under this section. But those with relatively expansive lifestyles or the too-clever-by-half schemers will be met with skepticism by the courts.
For the next year, though, this provision will be the subject of analysis and observation by attorneys. For debtors, it might also be a source of significant relief.
Talk to us about it, we can review your case for free and help you determine if bankruptcy is the best option for you at this time. You can reach the bankruptcy attorneys at Sasser Law Firm by phone, email, or through an online contact form.
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For more than 20 years, the Sasser Law Firm has been helping individuals and business owners sort through financial hardships to see the light at the end of the tunnel. Our North Carolina bankruptcy attorneys are all board-certified specialists, which means we have passed a complex exam, undergone a thorough peer review, and continue to earn legal education credits in this ever-evolving area of law.