Congress Extends Covid-19 Bankruptcy Relief for Consumers and Small Businesses
Congress has extended relief measures, making it easier and cheaper for small businesses to reorganize debt in Chapter 11 and ensure that individual borrowers who go bankrupt won’t have to give up their stimulus checks to pay overdue bills.
President Biden signed bipartisan legislation on Saturday extending until March 2022 the bankruptcy relief included in the federal Covid-19 stimulus package authorized by lawmakers last year. The provisions, which were about to expire, are intended to help consumers and businesses stabilize financial affairs disrupted by the pandemic.
The relief that Congress has extended expands the number of small businesses that qualify for a version of Chapter 11 that is cheaper and faster than the bankruptcy process used by large companies. Non-public enterprises with debt of less than $ 7.5 million are eligible for the expedited process, against a debt threshold of $ 2.7 million.
More than half of the companies that applied for Chapter 11 protection between 2013 and 2017 had debt of less than $ 7.5, according to University of Illinois law professor Robert Lawless.
Over 1,400 bankruptcy cases have been filed under the small business provision since its enactment until the end of January, of which nearly 30% would not have qualified without increasing the eligibility threshold of the limit debt, according to the American Bankruptcy Institute, a non-partisan bankruptcy. business group.