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Important Amendments to the Bankruptcy Code In the Consolidated Appropriations Act

By Richard F. Broude
February 01, 2021

[Editor's Note: Richard F. Broude is working on an update for his book Reorganizations Under Chapter 11 of the Bankruptcy Code to cover The Consolidated Appropriations Act that was enacted in December and we wanted to share a preview of that update.]

A few important amendments to the Bankruptcy Code were made by the Consolidated Appropriations Act, 2021, Pub. L. No. 116-260, §1001, which was enacted on Dec. 27, 2020 (the Act). Section 365 of the Code was among those amended. These amendments are quite important; and subscribers to Reorganizations Under Chapter 11 of the Bankruptcy Code should be made cognizant of them prior to the next scheduled release in the late Spring of 2021.

First, Section 365(d)(3) was amended, but only for Subchapter V cases, by adding a new Subparagraph (B), which provides that the time for the debtor to perform under an unexpired lease of nonresidential real property may be extended by the court for a period of 60 days after the order for relief. (See, Broude, Reorganizations Under Chapter 11 of the Bankruptcy Code §6.05[4] (Law Journal Press 1986, last updated December 2020). In the usual case, the debtor is to perform its obligations under such a lease from and after the order for relief. Under the amendment, this period may be extended for an additional 60 days. In each case, the extension may be made only if the debtor has experienced or is experiencing a material financial hardship, directly or indirectly, due to COVID-19. Consolidated Appropriations Act, Pub. L. No. 116-260, § 1001(f)(1)(A). See the relevant amendments infra. Any deferred payments constitute administrative expenses for purposes of Section 1191(e). (Discussed in §13B.17[5] of Reorganizations Under Chapter 11 of the Bankruptcy Code, N. 1 supra.) This amendment will sunset two years after the Act became effective, on Dec. 27, 2022. Consolidated Appropriations Act, §1001(f)(2). The amendment will apply in any case under Subchapter V of Title 11 that is commenced before Dec. 27, 2022.

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