Importantly, the CARES Act will allow many more businesses that may benefit from a Chapter 11 reorganization to take advantage of the new provisions of the United States Bankruptcy Code, namely the relaxed requirements for confirming a plan. Under the provisions of Subchapter 5, a plan of reorganization will generally be confirmed so long as it provides that all disposable income for three to five years will be used to make plan payments. 

The CARES Act also makes some changes to Chapter 7 and Chapter 13 of the United States Bankruptcy Code. First, the CARES Act amends the definition of current monthly income to exclude payments made to the debtor pursuant to the CARES Act from being treated as income in the means test calculation that determines a debtor's eligibility to file a Chapter 7 bankruptcy case.

Next, it excludes payments made to the debtor pursuant to the CARES Act from the calculation of disposable income that is conducted for the purposes of determining whether a Chapter 13 plan of reorganization may be confirmed.

Finally, it permits Chapter 13 debtors with plans that have already been confirmed to modify them based on a material financial hardship related to the coronavirus pandemic, including extending payments under the plan for up to seven years after the initial plan payment was due. All of these changes are applicable in pending Chapter 7 and Chapter 13 cases and will be applicable for one year after the CARES Act becomes effective.