What Changes Does The Consolidated Appropriations Act Make To The CARES Forbearance Claims And Modifications Of Chapter 13 Plans?
In response to the pandemic, many debtors experiencing economic hardship have applied to their mortgage lenders requesting forbearance or deferment of their home mortgage loans. The Consolidated Appropriations Act provides that the mortgage holders can file a proof of claim for the amounts not paid during a forbearance period granted under the CARES Act. There are specific requirements related to the treatment and characterization of these claims. I believe the amendment is more of a clarification and guidance as to how claims for secured payments that arise during the forbearance and deferment periods will be addressed by the Chapter 13 Trustees and the court. These claims are not identical to routine mortgage arrearages claims owed on the filing date of a case and have different characteristics than general unsecured claims in a case under Sections 501 and 502 of the Bankruptcy Code.
The amendment for the CARES Act claims for the mortgage holders expires one year after enactment, in December of 2021.
Under The Consolidated Appropriation Act, Or CAA, What Amendments Were Made To The Preference Exemption In A Bankruptcy Plan?
The Consolidated Appropriations Act added a slight revision to 547 of the Bankruptcy Code, known as the preference recovery Statute. The goal was to insulate from challenge certain payments made to landlords and vendors if the payments do not include fees, penalties, and interests greater than amounts contractually owed under flexible payment terms that may have been negotiated. This amendment will be subject to some interpretation. The legislative goal was to provide protection for landlords who are owed rent and for vendors who are working with debtors during this very difficult pandemic period, instead of provide value to the debtors. This will limit the potential recovery on preference claims, which are pursued against creditors prior to the filing of a bankruptcy case to increase the bankruptcy estate.
What Changes To The Bankruptcy Code Did The Consolidated Appropriation Act Make To Deliver The Debtor Extended Time To Assume Or Reject An Unexpired Non-Residential Property Lease?
The Consolidated Appropriation Act amended Section 365 of the Bankruptcy Code to increase by 90 days the initial 120-day period for a debtor to file a motion to assume or reject an unexpired commercial lease. Within this 210-day time period and utilizing existing provisions of Section 365, the debtors have an ability by Motion to request from the Court in its discretion 90 additional days to decide whether to assume or reject a commercial lease. This statutory extension of 90 day in the CAA recognizes the difficulty that retail debtors and businesses are experiencing. More flexibility is provided in the longer period (90 days with 90 days by Motion), added to the first 120 days, or nearly a year) for a debtor with authority from the Bankruptcy Court to evaluate the option of retaining a Lease. The additional time favors new debtors. Commercial landlords often exert pressure in a case upon the debtor who must promptly decide whether they will remain in business complying with the lease terms and obligations or attempt to find a new more suitable location for their business
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