Recent Changes in Bankruptcy Laws (2021)

In the world of bankruptcy law, the only constant is change. As economic environments fluctuate and financial landscapes shift, bankruptcy laws adapt to better serve both debtors and creditors. The year 2021 was no exception. For businesses and individuals in Atlanta, Georgia, and across the nation, staying abreast of these changes is essential for informed financial decision-making. Let’s delve into the most significant updates in bankruptcy legislation in 2021.

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     1. Coronavirus Aid, Relief, and Economic Security (CARES) Act Adjustments

     Originally signed into law in March 2020 in response to the COVID-19 pandemic, the CARES Act introduced several temporary changes to bankruptcy procedures. In 2021, some of these provisions were extended:

             • Exclusion of Federal Pandemic Relief Funds: Stimulus payments received from the federal government aren't considered as income for bankruptcy filing purposes. This ensures that receiving pandemic-related assistance won't push an individual's income over the limit for Chapter 7 eligibility.

             • Modification of Chapter 13 Plans: The CARES Act allowed those with existing Chapter 13 plans to extend their payments for up to seven years if they experienced financial hardships due to the pandemic.

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     2. Small Business Reorganization Act (SBRA) Enhancements

     The SBRA, which became effective in February 2020, streamlined the Chapter 11 process for small business debtors. The act aimed to make the process less complex and more affordable. Here are the 2021-related adjustments:

             • Increase in Debt Threshold: Initially, the SBRA was available to businesses with secured and unsecured debts of less than $2,725,625. In 2021, this threshold was temporarily increased to $7.5 million, allowing more businesses to avail the benefits of the SBRA.

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     3. Bankruptcy Relief Extension for Family Farmers

The Family Farmer Relief Act of 2019 made more family farmers eligible for Chapter 12 bankruptcy by raising the debt limit. With the challenges posed by the pandemic, there was a move in 2021 to further support family farmers and ensure they remain protected during these tumultuous times.

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     4. Veterans' Benefits and Bankruptcy

Previously, disability benefits paid to veterans were counted as income, potentially affecting the Means Test for Chapter 7 eligibility. Changes in 2021 clarified that veterans' disability payments are not to be included in the "current monthly income" calculation.

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     5. Consumer Protection Updates

     In 2021, there was an increased focus on safeguarding consumers from aggressive collection practices post-bankruptcy:

             • Enhanced Fair Credit Reporting: Creditors must be more diligent in credit reporting for consumers who've filed for bankruptcy, ensuring discharged debts are correctly reported, which can be pivotal in rebuilding credit.

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Final Thoughts

For businesses and individuals in Georgia, understanding the evolving bankruptcy landscape is paramount. The changes in 2021 reflect a broader trend towards accommodating the unique financial challenges posed by external factors like the pandemic.

If you or your business are considering bankruptcy, or if you're simply looking to understand how these legal changes might impact you, it's crucial to consult with an expert. With years of experience and a finger on the pulse of the latest legal updates, Ted Stapleton of Theodore N. Stapleton, P.C. is here to guide you through these intricate waters. Navigating the nuances of bankruptcy law can be daunting, but with the right guidance, you can chart a course towards financial stability.

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Note: This article is for informational purposes only and does not constitute legal advice. Always consult with an attorney for any legal decisions.