The Chapter 13 Debtor may retain Covid Relief Payments.

Normally the Debtor must contribute all tax refunds received during a Chapter 13 Plan to the Chapter 13 Trustee unless the plan already provides a 100% to the unsecured creditors.

There is an exception pursuant to the American Rescue Plan Act of 2021 Pub L. No. 117-2. (The “ARP”) for Covid Relief Payments.

The ARP was enacted on March 11th, 2021. It provides relief for qualified individuals t address the impact of COVID-19 including additional recovery rebates and expanded child t creditors. The ARP provided for a third round of recovery rebates, which total at most $1,400 per individual or $2,800 per married couple filing jointly, with an additional $1,400 paid for each qualifying dependent.

The rebates were payable in full to qualifying individuals earning les than $75,000, married couples filing jointly earning less than $150,000, and heads of household earning less than $112,500.

As part of the Consolidated Appropriations Act, 2021, Pub. L. No. 116-260 (the “CAA”) Congress amended 11 U.S.C. Sec. 541 to exclude “recovery rebates made under section 6428 of the Internal Revenue Code of 1986” from bankruptcy estate property. Former 11 U.S.C. Sec. 54l(b)(l 1). These are Covid Relief Payments.

Section 6428 implemented the first round of recovery rebates under the CARE Act. Pub. L. No. 116-136, 6 U.S.C. Sec. 6428.

The CAA also provided for a second round of recovery rebates by adding section 6428A to the Internal Revenue Code, providing that those rebates were “in addition to the credit allowed under section 6428.” 26 U.S.C. Sec. 6428A.

The ARP similarly implemented the third round of recovery rebates under new section 6428B. U.S.C. Sec. 6428B.

The best reading of 11 U.S.C. Sec. 54l(b)(l l) is that it applies to all three round of recovery rebates, including those made under the ARP, to exclude them from bankruptcy estates.

This interpretation is consistent with the plain language of section 541 (b )( 11) standing alone, as well as 26 U.S.C. Sec. 6428, 6428A, and 6428B read in conjunction. It is also consistent with congressional intent as expressed by the CAA’ s amendments to section 541 (b ).

By Anerio Altman.