COVID’s Impact On Bankruptcy Laws

Written By: Emil FleysherFebruary 23, 2022

Read more about COVID’s impact on bankruptcy laws.

The ways of handling the bankruptcy changed significantly in 2020. This was when the COVID-19 pandemic was really starting to affect people’s financial stability. Bankruptcy attorneys had to adapt quickly and adjust how they handled bankruptcy cases in order to do the best for their clients. With different federal assistance options coming into play, bankruptcies saw a decline in 2020 and 2021 compared to previous years. This has been attributed to various factors like:

  • Eviction and foreclosure moratoriums
  • Stimulus checks
  • Court closures
  • Increased unemployment benefits
  • A general unwillingness to pursue bad assets

While these were factors that may have postponed or even helped debtors avoid bankruptcy, many of these programs have come or will come to an end due to COVID’s impact. 


The Small Business Reorganization Act (SBRA) took effect in February 2020. Furthermore, it made filing Chapter 11 reorganization for small companies easier. It sped up the proposal and implementation of a new plan, reduced costs for debtors, and even provided quicker returns for creditors. Other components of the new law included no necessary disclosure statements, no unsecured creditors committee, and no quarterly fees. 


This relief act (Coronavirus Aid, Relief, and Economic Security Act) also played a significant role for debtors who enlisted the help of bankruptcy attorneys to file for bankruptcy. Amongst many other things, the CARES act redefined small businesses and companies to include any entity under $7.5 trillion in total eligible debt. It issued three rounds of stimulus checks, enacted the Child Tax Credit, increased and extended unemployment payments, and established emergency rental assistance. All of these provisions helped many individuals and families avoid needing to consider bankruptcy. However, some of the programs have now ended and people are still struggling. 


The Consolidated Appropriations Act has several provisions that bankruptcy attorneys had to learn. It amended section 541 of the bankruptcy code to protect the stimulus payments from being considered property of the estate and surrendered to creditors. It also allowed the court the discretion to discharge a Chapter 13 debtor who has defaulted on three mortgage payments or less due to financial hardship stemming from COVID-19. On top of that, the act also has several other provisions aimed to lessen the financial burden brought on by bankruptcy and COVID-19 for individuals and businesses alike.

What If I Am in the Process of Filing for Bankruptcy?

If you were in the process of filing for bankruptcy before all of these laws and bills are enacted, then there will more than likely be delays. Some meetings are being held virtually, but some are postponed and canceled on short notice. Bankruptcy attorneys will need to be on top of any schedule changes and communicate that with debtors. 

What If I Am Mid-Bankruptcy?

If you were mid-bankruptcy, then things can get a bit complex. Since payments and aid are being issued through the federal government, your bankruptcy trustee might not receive these funds. You may have also had to have your plan modified due to these payments and new programs. 

Considering Filing for Bankruptcy due to COVID’s Impact?

Suppose you are currently considering filing for bankruptcy. In that case, whether it is a direct result of the COVID-19 pandemic or otherwise, you will need bankruptcy attorneys familiar with all the new legislation. And, who know when to file to get the best outcome possible for your case. If you file for bankruptcy now, it might experience a delay. Also, most of it will be done over the phone for the safety of all participants. Remember that automatic stays will still be in effect when you file for bankruptcy. 

Call The Law Offices Of Emil Fleysher Today

There is no doubt COVID’s impact on bankruptcy is serious.

Ultimately, bankruptcy has changed significantly due to COVID-19. However, filing for bankruptcy may still be the best choice under your circumstances. If you are drowning in debt and looking for options, you need to contact the Law Offices of Emil Fleysher, P.A., at 888-886-0020 to get started today.

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