The SBA’s Rules Exclude Bankruptcy Debtors From Relief Under the Paycheck Protection Program

The SBA’s Rules Exclude Bankruptcy Debtors from Relief Under the Paycheck Protection Program

Authors:Hugh M.

Pursuant to the Federal Credit Union Act, the National Credit Union Administration issued a temporary final rule on April 21, easing regulatory requirements to assist federal credit unions (“FCUs”) and federally insured credit unions (“FICUs”) during the coronavirus (“COVID-19”) pandemic. The rule makes the following key changes that will be effective through December 31, 2020:

The macroeconomic impact of the coronavirus (COVID-19) on nearly all industries is forcing businesses directly and indirectly affected by the global pandemic to consider restructuring alternatives. Since prospective businesses looking to reorganize or liquidate through the chapter 11 process are likely to need immediate cash in order to operate their businesses, these companies often will look to existing or third-party lenders (and in certain cases, stalking horse bidders or customer groups) to provide them with debtor-in-possession financing (DIP Financing).

Earlier this month, in Davis v. Carrington Mortgage Services, LLC, et al., the United States District Court for the District of Nevada held that consumer reporting agencies are not obligated to determine the legal status of debts. The Court also reinforced the plausible pleading standard for Fair Credit Reporting Act cases, while providing an overview of CRAs’ obligations under the act.

Counterparties to swap and repurchase transactions have come under pressure following the financial dislocations caused by the novel coronavirus pandemic in 2020 (“COVID-19”). Falling and illiquid markets may result in margin calls that create immediate liquidity risk and may lead to an event of default if required margin is not posted in accordance with the contract.

As COVID-19 related economic disruptions place unprecedented stress on cash flows, the risk of insolvency is a new and growing concern for many businesses. Against the backdrop of a decades-long growth in corporate debt, boards of directors are making decisions that have the potential for pitting the interests of creditors against the interests of equity shareholders.

Both the German federal government and various German federal states are pushing ahead with packages of measures to mitigate the as-yet-unforeseeable economic consequences of the COVID-19 pandemic.

Overview

In order to mitigate the economic consequences of the COVID-19 pandemic, the legislator passed the COVID-19 Insolvency Suspension Act (COVInsAG; the “Act”), which came into force on 27 March with retroactive effect from 1 March 2020.

On March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief, and Economic Security Act, Public Law No. 116-136 (the “CARES Act” or the “Act”), the stimulus package designed to mitigate the widespread economic impacts of the coronavirus (“COVID-19”). The Act includes important temporary modifications [1] to Subchapter V of the Bankruptcy Code (the “Code”), applicable to small -business debtor reorganizations.

Temporary Increase in Debt Limit