The Federal Government Will Now Give PPP Loans to Borrowers in Bankruptcy – By Lydia DePillis (ProPublica) / April 19 2021
Thousands of companies working their way out of bankruptcy are now eligible for the Paycheck Protection Program after ProPublica reported that the Small Business Administration had been excluding them.
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The federal government has quietly reversed course on a policy that had kept thousands of businesses from applying for pandemic economic aid, with only weeks to go before funds are expected to run out.
In late March, ProPublica reported on a Small Business Administration rule that disqualified individuals or businesses currently in bankruptcy from getting relief through the Paycheck Protection Program, an $813 billion pot of funds distributed to small businesses in the form of loans that are forgiven if the money is mostly spent on payroll. The agency had battled in court against several bankrupt companies attempting to apply for PPP loans, and did not change course even after Congress explicitly passed legislation in December allowing it to do so.
Referencing ProPublica’s story, the National Association of Consumer Bankruptcy Attorneys wrote a letter to newly installed SBA Administrator Isabella Guzman urging her to follow Congress’ suggestion and tell the Executive Office for U.S. Trustees — a division of the Justice Department that oversees most American bankruptcy courts — to allow debtors to receive PPP loans.