The script will work correctly with filenames or paths that contain spaces or special characters, but there is a slight modification required. The modification is to use double quotes (") instead of single quotes (') around the variables.

Here's the modified script:

#!/bin/bash

# specify the extension of the files to look for
extension=".txt"

# loop through all files in the current directory and its subdirectories
find . -type f -name "*$extension" | while read file; do
  # extract the date the file was last modified
  date=$(date -r "$file" +%Y-%m-%d)

  # create a directory named after the modification date, if it doesn't already exist
  if [ ! -d "$date" ]; then
    mkdir "$date"
  fi

  # move the file into the directory named after its modification date
  mv "$file" "$date"
done
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