Two judges agreed in their opinions on July 30: The CARES Act, enacted on March 27, cannot be invoked to confirm a chapter 13 plan with a seven-year duration if the plan was confirmed after March 27. The new statute only allows modifying a plan to have a seven-year duration if the plan was confirmed before March 27.
The $2.2 trillion Coronavirus Aid, Relief and Economic Security Act, or CARES Act, became law on March 27. Pub. L. No. 116-136. The Act has provisions to aid individuals and companies in bankruptcy or threatened with bankruptcy as a result of the coronavirus pandemic.
Section 1102 of the legislation provided “loans” under the Paycheck Protection Program, or PPP. Although denominated as loans, the PPP loans will be forgiven if at least 75% was spent for payroll. The lower courts are split on whether companies in bankruptcy were improperly excluded from obtaining PPP loans.
For individuals in chapter 13, Section 1113(b)(1)(C) of the CARES Act amended Section 1329 of the Bankruptcy Code by adding subsection (d). “[F]or a plan confirmed prior to the date of enactment of this subsection,” it states that someone experiencing “material financial hardship” as a result of the virus may modify a chapter 13 plan to provide for payments up to a period of no more “than 7 years after the time that the first payment under the original confirmed plan was due.”
In terms of applicability of the amendment adding Section 1329(d), Section 1113(b)(1)(D) of the CARES Act provides that the amendment “shall apply to any case for which a plan has been confirmed . . . before the date of enactment of this Act,” namely, before March 27.
Bankruptcy Judge Thomas J. Tucker of Detroit faced a straightforward question. The debtors had confirmed their chapter 13 plan in April. They then filed a motion in July to modify the plan by stretching out the plan to seven years under newly added Section 1329(d).
Although no one objected, Judge Tucker said in his July 30 opinion that he could not stretch out the plan to seven years. In his two-page ruling, he said that the amendment “applies only to cases in which a plan was confirmed before the enactment of the Cares Act.”
Judge Tucker added that “no plan modification [in this case] may extend the length of the confirmed plan beyond 5 years, under 11 U.S.C. § 1329(c).”
Chief Bankruptcy Judge Laura K. Grandy of East St. Louis, Ill., dealt with a debtor making a more sophisticated argument. The debtor had filed her chapter 13 petition in July 2019. Her second amended plan was set for confirmation on April 30.
Cleverly, the debtor’s counsel asked Judge Grandy to confirm the plan retroactively to a date before March 27, so the debtor could amend the plan by taking advantage of the seven-year stretchout.
Judge Grandy declined the invitation in her July 30 opinion. The “plain language” of the amendment barred the debtor from stretching out the plan for seven years because the plan had not been confirmed before March 27.
By its own terms, Judge Grandy said that Section 1139(d) applies to a “plan confirmed prior to the date of enactment of this subsection.” Similarly, Section 1113(b)(1)(D) of the CARES Act makes the change applicable “to any case for which a plan has been confirmed . . . before the date of enactment of this Act.”
Judge Grandy said that the bankruptcy version of the All Writs Act, Section 105(a) of the Bankruptcy Code, “does not grant the Court authority to ignore the explicit mandates of the Cares Act amendments.” Likewise, Law v. Siegel, 571 U.S. 415, 420-421 (2014), bars the bankruptcy court from contravening “specific statutory provisions,” she said.
Judge Grandy recognized that some debtors may have begun facing financial problems since the enactment of the CARES Act, making them ineligible for a seven-year plan if their plan had not been confirmed before March 27. Aware of the “hardships facing debtors as a result of the coronavirus pandemic,” she said that “the Cares Act amendments . . . may not address every debtor’s situation, but the Court is bound by the language of the Act nonetheless.”
The opinions are:
- In re Drews, 19-52728 (Bankr. E.D. Mich. July 30, 2020)
- In re Bridges, 19-31012 (Bankr. S.D. Ill. July 30, 2020)
Two judges agreed in their opinions on July 30: The CARES Act, enacted on March 27, cannot be invoked to confirm a chapter 13 plan with a seven-year duration if the plan was confirmed after March 27. The new statute only allows modifying a plan to have a seven-year duration if the plan was confirmed before March 27.
The $2.2 trillion Coronavirus Aid, Relief and Economic Security Act, or CARES Act, became law on March 27. Pub. L. No. 116-136. The Act has provisions to aid individuals and companies in bankruptcy or threatened with bankruptcy as a result of the coronavirus pandemic.
Section 1102 of the legislation provided “loans” under the Paycheck Protection Program, or PPP. Although denominated as loans, the PPP loans will be forgiven if at least 75% was spent for payroll. The lower courts are split on whether companies in bankruptcy were improperly excluded from obtaining PPP loans.
For individuals in chapter 13, Section 1113(b)(1)(C) of the CARES Act amended Section 1329 of the Bankruptcy Code by adding subsection (d). “[F]or a plan confirmed prior to the date of enactment of this subsection,” it states that someone experiencing “material financial hardship” as a result of the virus may modify a chapter 13 plan to provide for payments up to a period of no more “than 7 years after the time that the first payment under the original confirmed plan was due.”
In terms of applicability of the amendment adding Section 1329(d), Section 1113(b)(1)(D) of the CARES Act provides that the amendment “shall apply to any case for which a plan has been confirmed . . . before the date of enactment of this Act,” namely, before March 27.
Bankruptcy Judge Thomas J. Tucker of Detroit faced a straightforward question. The debtors had confirmed their chapter 13 plan in April. They then filed a motion in July to modify the plan by stretching out the plan to seven years under newly added Section 1329(d).
Although no one objected, Judge Tucker said in his July 30 opinion that he could not stretch out the plan to seven years. In his two-page ruling, he said that the amendment “applies only to cases in which a plan was confirmed before the enactment of the Cares Act.”
Judge Tucker added that “no plan modification [in this case] may extend the length of the confirmed plan beyond 5 years, under 11 U.S.C. § 1329(c).”