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Thompson Hine LLP, a full-service business law firm with approximately 400 lawyers in 8 offices, was ranked number 1 in the category “Most innovative North American law firms: New working models” by The Financial Times and was 1 of 7 firms shortlisted for The American Lawyer’s inaugural Legal Services Innovation Award. The firm has been recognized by the National Law Journal as a Legal Technology Trailblazer and featured by Bloomberg for its innovative service delivery models, which drive accuracy and predictability. The firm’s commitment to innovation is embodied in Thompson Hine SmartPaTHTM – a smarter way to work – predictable, efficient and aligned with client goals. For more information, please visit ThompsonHine.com and ThompsonHine.com/SmartPaTH.

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On December 21, 2020, Congress passed a monumental $900 billion pandemic relief package. It includes several changes to the Bankruptcy Code that will provide additional relief for both individual and corporate debtors, as well as additional protections for creditors impacted by the pandemic. President Trump signed the bill into law on December 27. Most of the revisions to the Bankruptcy Code are temporary and will expire after either one or two years.

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As a preliminary matter, the bill makes certain changes to debtors’ eligibility for CARES Act funding. First, Section 525 of the Bankruptcy Code, which governs protection against discriminatory treatment against debtors, is amended to clarify that individual debtors cannot be denied CARES Act relief on the basis of a past or present bankruptcy filing. This change expires after one year. Second, under Section 364 of the Bankruptcy Code, corporate debtors may potentially be eligible for CARES Act funding with bankruptcy court authorization. This amendment will not become effective, however, unless and until the SBA Administrator submits a written determination to the Office of the U.S. Trustee that corporate debtors are generally eligible for CARES Act funding. Provided such eligibility is determined, the changes to Section 364 contemplate that a corporate debtor may file a motion with the bankruptcy court to obtain CARES Act funding, and the court must hold a hearing within seven days. If the court authorizes the loan, then, to the extent it is not forgiven, it will be treated as a priority claim ahead of administrative expenses under Section 503(b) and 507(b). This amendment expires two years after the bill becomes law, regardless of when or if the SBA determines corporate debtors are eligible, and existing debtors will not be grandfathered in.

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Other material changes to the Bankruptcy Code contained in the bill include the following:

Finally, other changes to the Bankruptcy Code are relatively minor. For example, the Bankruptcy Code’s definition of “property of the estate” in Section 541(b) will be harmonized with changes made to the Tax Code by the relief bill. Further, under Section 366 of the Bankruptcy Code, individual debtors will not be required to provide adequate assurance of future payment of utilities if they make a utility payment within 20 days of filing, and continue to make utility payments as they come due. Additionally, amendments to Section 507(d) provide that an entity that is subrogated to the rights of a holder of a claim related to customs duties for the importation of merchandise is still subrogated to the right of the holder of such claim to priority under such subsection. Each of these changes to the Bankruptcy Code expires after one year.

As the economic fallout of the pandemic continues, both debtors and creditors are likely to avail themselves of these new protections when they become available.

Sean A. Gordon 404.407.3678 216.566.5626 <a href="mailto:Sean.Gordon@ThompsonHine.com">Sean.Gordon@ThompsonHine.com</a>

Austin B. Alexander 404.407.3683 <a href="mailto:Austin.Alexander@ThompsonHine.com">Austin.Alexander@ThompsonHine.com</a>

This advisory bulletin may be reproduced, in whole or in part, with the prior permission of Thompson Hine LLP and acknowledgement of its source and copyright. This publication is intended to inform clients about legal matters of current interest. It is not intended as legal advice. Readers should not act upon the information contained in it without professional counsel.

This document may be considered attorney advertising in some jurisdictions.

https://admin.thompsonhine.com/wp-content/uploads/2022/04/New_COVID-19_Relief_Package_Provides_Additional_Pandemic_Bankruptcy_Protections.pdf

New COVID-19 Relief Package Provides Additional Pandemic Bankruptcy Protections

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