Bankruptcy and the CARES Act

As more businesses close during the unprecedented Coronavirus pandemic and a record 22 million Americans filed for bankruptcy as of April 17th, the idea of bankruptcy has become a startling reality for many Americans and small businesses. The Coronavirus pandemic has also served as a double-edged sword, giving Americans facing bankruptcy many options, thanks to the CARES Act.

Despite hiccups in its early phases and questions surrounding the Senate and House of Representatives, the CARES Act was signed into law by President Trump on March 27th, 2020, and provides a series of benefits to individuals and small businesses, as well as large corporations.

What are my options?

As an individual, you have a few options. With the CARES Act having been signed into law, the $1,200 checks per eligible person could be enough to cover bills and living expenses. If this isn’t the case, filing for chapter seven or chapter thirteen bankruptcy, in combination with the check, could see individuals through the pandemic.

For small businesses, a Small Business Administration (SBA) forgivable loan totaling 2.5 times the businesses’ payroll, pulled from the CARES Act’s stimulus package, can cover payroll, debt, and other bills, potentially buying the business time to develop a plan to keep the income flowing during the crisis. This benefits from a low interest rate (2.75% for nonprofits, and 3.75% for for-profit companies.) If the loan amount isn’t enough, or doesn’t come quickly enough, small businesses can file for chapter eleven bankruptcy, preventing debtors from collecting and giving the business time to stabilize and work out a plan.

Large corporations saw a stimulus package of $500 billion in loans and other repayable funding options, although they come with a series of requirements.

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