Forgiveness for the Unforgiven: Small Business Chapter 11 Solution for Adverse PPP Loan Outcomes

Since the Payroll Protection Program (PPP) became law March 27, businesses who applied and obtained PPP loans, or considered applying for them, were given a roller coaster ride of uncertainty as to whether, and under what terms, the loans would be forgiven.

First, PPP borrowers who had existing lines of credit with other lenders—not prohibited under PPP—were condemned by Congress and the Treasury Secretary and threatened with criminal investigation. Later, when it became apparent that the rigid requirements for loan forgiveness were unworkable for the businesses most in need, Congress passed legislation to loosen the requirements for PPP loan forgiveness.

Still, the current political climate ensures that uncertainty over loan forgiveness will continue. For those borrowers who are denied meaningful loan forgiveness and must add short-term SBA debt to their balance sheets, there is an alternative to reduce the additional debt load: the Small Business Debtor Reorganization Act, Subchapter V to Chapter 11 of the Bankruptcy Code. Subchapter V became law last February.

Read Full Article>>>

You may also like