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CARES Act "Rebates" and Bankruptcy

posted by Dalié Jiménez

Related to Pamela's last post and our article regarding garnishments and the CARES Act "rebates," the US Trustee issued a notice to Chapter 7 and Chapter 13 trustees giving them guidance on what to do about them in a bankruptcy case.

The top line: these payments should not be included in the statutory definitions of "current monthly income" or "disposable income" per the CARES Act itself. But the Act failed to discuss whether these payments are property of the estate, which typically would mean that they are. I know bankruptcy lawyers have been dealing with this already and many feared that some trustees would try to obtain these mounts. I was therefore very pleased to read this in the US Trustee notice, in particular the part in bold:

Regardless of whether the rebate is property of the estate, the United States Trustee expects that it is highly unlikely that the trustee would administer the payment after consideration of all relevant circumstances ... Trustees are directed to notify the United States Trustee prior to taking any action to recover recovery rebates or objecting to a chapter 13 plan based on the treatment of recovery rebates.

Comments

Of course, a creditor may object to confirmation without UST clearance.

I think most trustees, I wont speak for them all, even without Congress taking action would use common sense, and their business judgment to not administer these "Rebates". Individuals and families need these payments and most individuals would be exempt under applicable state and federal exemptions. For most cases, I also don't see them factoring into a confirmation analysis that would hold up confirming a chapter 13 plan that otherwise complies with 11 USC 1322, 1325 as they are one time payment, likely exempt and reasonably necessary for the support.

What about chapter 11 of the SBA subchapter 5?

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