CARES Act Update (2021)

You may recall that last year the CARES Act allowed debtors to modify their confirmed plans and extend a plan duration for up to 84 months for COVID-related reasons. See my March 29, 2020 post here. That provision was extended by Congress on March 27, 2021 for another year. Subsection (d) of Section 1329 of the Bankruptcy Code, which was added by the CARES Act, now applies to debtors with plans confirmed on or before March 27, 2021. Section 1329(d) provides:

(d)(1) Subject to paragraph (3), for a plan confirmed prior to the date of enactment of this subsection, the plan may be modified upon the request of the debtor if-

(A) the debtor is experiencing or has experienced a material financial hardship due, directly or indirectly, to the coronavirus disease 2019 (COVID-19) pandemic; and

(B) the modification is approved after notice and a hearing.

(2) A plan modified under paragraph (1) may not provide for payments over a period that expires more than 7 years after the time that the first payment under the original confirmed plan was due.

(3) Sections 1322(a), 1322(b), 1323(c), and the requirements of section 1325(a) shall apply to any modification under paragraph (1).

This provision will disappear on March 27, 2022 based on a sunset provision in the Act.

I generally do not object to a motion to modify to change plan payments and extend the duration past 60 months, BUT:

• The reason for the plan modification must be that “the debtor is experiencing or has experienced a material financial hardship due, directly or indirectly,” to the pandemic. If your motion to modify doesn’t mention a COVID/pandemic related reason for modifying, the debtor cannot extend the plan duration past 60 months.
• The debtor’s plan must have been confirmed on or before March 27, 2021. If the debtor’s plan was confirmed after that date, the debtor cannot extend the plan duration past 60 months.