Covid-19 and the 7 Year Plan

By Ken Siomos, Staff Attorney for Marsha L. Combs-Skinner (Newman, IL)

A small part of the recently passed “Cares Act” is the ability of Chapter 13 debtors experiencing a “material financial hardship” as a result of the covid-19 pandemic to modify their plan to 84 months.i Many Chapter 13 Trustee’s are likely anticipating a series of Chapter 13 Plan defaults and requests for moratoriums on Chapter 13 payments; the extension of plans by up to 24 months (or 48 months for those who confirmed a 36 month Plan) will certainly help debtors who are required to make up this period of non-payment to the Chapter 13 Trustee, especially if they are also going to be catching up on their direct-pay mortgage/rent and/or car payments missed during this period of suddenly record-high unemployment. For all of the criticism of Congress for its neglect in drafting clear bankruptcy legislation, I do applaud them for even considering the implications of covid-19 for bankruptcy debtors.

However, there is a material and arbitrary limitation within the Cares Act – the Plan must be confirmed, “prior to the date of enactment of this subsection.”ii Moreover, the Act does not modify 1322 or 1325 to allow a debtor to confirm an 84 month Plan, even if suffering a “material economic hardship” from covid-19. In short, a debtor suffering covid-19 related hardship who confirms their plan the day prior to the enactment date of the “Cares Act” could immediately modify their 60 month Plan to extend it by 24 months, decreasing their payment by an average of 29%,iii while a similar debtor whose plan is not confirmed prior to the effective date of the Act is unable to access those additional 24 months either by confirming a longer plan or modifying their plan after confirmation.

Congress certainly had to act quickly with respect to covid-19 and I certainly appreciate that the bankruptcy implications on current monthly income, projected disposable income, and plan length were considered at all; however, as quickly as reasonably practicable, technical corrections to Section 1113 should be made such that debtors suffering “material financial hardship” are a result of covid-19, who are unable to confirm prior to the date of enactment, have the same opportunity to extend the length of their Plan as debtors who are only differentiated by the date of their confirmation order.

_______________________

[i] Section 1113(d)(1)

[ii] Id.

[iii] Assuming even monthly payments and a 60 month Plan, an extension of 24 months is a 40% increase in length but 24 out of 84 months is 28.57% and therefore a hypothetical $100 x 60 Plan could be changed to a $71.43 x 84 Plan, a 29% decrease in payment to reach a $6,000.00 “base.”

_______________________

Ken Siomos Photo Ken Siomos has been the Staff Attorney for Marsha L. Combs-Skinner, Standing Chapter 13 Trustee, in the Central District of Illinois, since July 2018. He was previously Staff Attorney for John H. Germeraad, the Standing Chapter 13 Trustee for the Springfield Division of the Central District of Illinois, until the Trustee’s retirement at the end of June 2018. Siomos graduated magna cum laude from the University of Illinois at Urbana Champaign College of Law. He previously attended North Central College and graduated cum laude with degrees in economics and finance.

No Author Biography has been linked to this Article.

Related Articles

March 3, 2019
By William Houston Brown, United States Bankruptcy Judge, Retired; Editor/Adviser, The Academy On April 1, 2019, an increase takes effect in those dollar amounts in the Bankruptcy Code that are subject to adjustment every three years.1 The following increases have significance in everything from the eligibility maximums for filing under Chapters 12 and 13 to the debtor’s exemptions. Relevant Official...
M Joseph Photo 2-1-22
June 12, 2022
It is always troublesome when an individual bankruptcy petition is filed by power of attorney. It may be less of a concern in a chapter 7 case when the debtor is in the military, incarcerated, or temporarily disabled. More worrisome is the incompetent or advanced aged debtor who has been placed in a chapter 13 by someone holding a power...
Members
William-1_print_2019
Selected Consumer Opinions Since January 1, 2022 Automatic Stay Denial of stay relief was final and appealable, although it was “without prejudice.”Deciding an issue not addressed in Ritzen Grp., Inc. v. Jackson Masonry, LLC, 140 S.Ct. 582 (2020), the Ninth Circuit concluded that the bankruptcy court’s order denying stay relief was final and appealable, despite its “without prejudice” language, because...
Members
March 31, 2019
By Henry E. Hildebrand, III, Chapter 13 Standing Trustee for the Middle District of Tennessee When the wages of an insolvent spouse are deposited into the couple’s entireties account, both spouses are fraudulent transferees; wage deposits spent on non-necessary expenditures are recoverable from the joint account by determining the proportion to the overall share of wages in the account as...
Members
August 18, 2019
By Cathy Moran, Esq. (Redwood City, CA) My Google Alert popped up a lovely win for a Chapter 13 homeowner, but all I could see was the train wreck that lies ahead. The bankruptcy court ruled that the confirmed (and completed) plan trumped a late-filed mortgage proof of claim. Payment of the amount provided in the plan cured the prepetition...
Members
Academy Circle Logo Final
December 4, 2022
Many have had the unpleasant experience of coping with an ill-mannered and disrespectful opposing counsel. Unnecessary motions are filed and unfounded allegations are asserted. Relief requested has no basis in fact or law. Temperatures rise. The volume of argument is loud. Your staff and you are upset. What to do?We asked the Emeritus Trustees and here are some recommendations: First,...
Members
September 29, 2019
By Academy Staff Jan P. Johnson served as a Chapter Standing 13 Trustee for the Eastern District of California, Sacramento Division, from 1998 to September 30, 2019. Prior to this appointment, he served as Chapter 13 Standing Trustee for the District of Puerto Rico from 1989 where he was responsible for over 25,000 cases. He was also appointed as Standing...
March 3, 2019
By Carri Hayden Johnson, Staff Attorney to O. Byron Meredith, Chapter 13 Trustee (Savannah, GA) The filing of a bankruptcy petition acts as a stay of certain actions against the debtor or the debtor’s property. The automatic stay is essentially the fundamental reason that a debtor seeks relief in the form of bankruptcy, as it allows the debtor a brief...
Members
May 31, 2020
(Reprinted with permission: https://www.dailyjournal.com/) By M. Jonathan Hayes, Resnik Hayes, Moradi LLP (Los Angeles) I met with my best friend Jim King, consumer bankruptcy attorney extraordinaire, during the Thanksgiving break in 2014, several weeks before his untimely death. We met at his office in Glendale to do his oral history. Somewhere in there I told him he could borrow my...
Members

Looking to Become a Member?

ConsiderChapter13.org offers a forum to advance continuing education of consumer bankruptcy via access to insightful articles, informative webinars, and the latest industry news. Join now to benefit from expert resources and stay informed.

Webinars

These informative sessions are led by industry experts and cover a range of consumer bankruptcy topics.

Member Articles

Written by industry experts, these articles provide in-depth analysis and practical guidance on consumer bankruptcy topics.

Industry News

The Academy is the go-to source for the latest news and analysis in the Chapter 13 bankruptcy industry.

To get started, please let us know which of these best fits your current position: