The CARES Act and your Chapter 13 plan

Coronavirus Aid, Relief, and Economic Security Act (CARES) was signed by President Trump into law on March 27, 2020. It did a lot of things to try to keep the economy running. The novel coronavirus effected nearly every aspect of life in Michigan including bankruptcy. Bankruptcy has been a source for relief for people suffering because of COVID-19. Credit cards, medical bills, personal loans, went unpaid. Farmington Hills and Detroit have been particularly hit with hard times. In Michigan there have been 113,183 cases as of September 15, 2020. Bankruptcy can help most of these bad financial situations.


If you already have filed for Chapter 13 there is another option for you now under the CARES Act. It can extend your Chapter 13 plan for up to seven years from the date the initial plan payment was due. All the Chapter 13 filer (the debtor) has to show to get the extension is that they suffered a “material hardship” directly or indirecly related to COVID. So Chapter 13 plans will not fail because of COVID.


It is interesting that COVID does not need to be the reason the Chapter 13 plan will not complete in five years, the otherwise maximum amount of time.


As a Detroit Bankruptcy Judge Thomas Tucker noted, however, the Chapter 13 plan must be confirmed before March 27, 2020.


It is also noteworthy that Chapter 13 requires you to give all of your “disposable income” to the creditors. The CARES act excludes from the definition of disposable income money allocated by the government such as unemployment. This can stop your Chapter 13 payment from going up.


Chapter 13 Bankruptcy is not a “do it yourself” type of thing. It is only meant for experienced Bankruptcy lawyers as the Chapter 13 laws are complex. Contact us or another Bankruptcy lawyer for assistance. It will not be a free attorney but the money will be worth it.