Along with the PPP (Payroll Protection Program) another fed run program rolled out this week called Main Street to provide low-cost loans to firms with fewer than 15,000 workers. The Main Street launch has received a luke warm welcome from community banks due to the paperwork required per an American Bankruptcy Institute article today, but basically the lender has a 95% backstop from the federal government in event of default.
I wonder why the lukewarm interest from community banks? My guess is that they much prefer PPP for their clients, which is a 100% forgiveable loan, and has been extended recently to allow for forgiveness for 24 weeks of payroll rather than just eight, for those businesses who were under shut down orders for the first couple months and couldn’t bring back their workers. Since PPP funds are still available and the application deadline is not until the end of June, of course that sounds like a much better alternative. Plus, we have found that community banks did a far better job than larger banks in getting approvals from the SBA.
But for those who need funds that will be spent for things not covered under PPP, this may be an excellent alternative.
Some creditors and loan servicers are jumping the gun in pursuing foreclosures, HOA liens, COA liens. The federal government is also taking the position that it’s okay to pursue cases already in litigation. We had to file a motion to abate arguing that the moratorium preventing involuntary collection activity includes cases already in litigation — which is well supported by case law.
None of these things should happening while the moratoriums are still in place. For mortgages and tenant evictions in Florida, that means we are in a holding pattern until July 2 when the foreclosure and eviction moratorium is set to expire. This includes actions on other liens as well. Florida Statute Section 702.09 defines mortgages to include HOA and COA liens so they have to put things in park, same as other traditional mortgages.
It also appears that certain banks are not honoring mandatory forbearance requirements — if you have received any messages, letters or phone calls re: SPECIAL FORBEARANCE options, please reach out to us asap to help make sure that this goes smoothly.
Small businesses often struggle to reorganize effectively under Chapter 11 of the Bankruptcy Code. To address this issue, Congress passed the Small Business Reorganization Act of 2019, effective February 2020. The Act aims to make small business bankruptcies faster and less expensive, thereby making Ch. 11 a viable option for small businesses who previously could not afford to take advantage of Ch. 11 reorganization.
The Act applies to business debtors with secured and unsecured debts totaling less than $2,725,625. However, the CARES Act temporarily increased the debt limit to $7.5 million for cases filed on or before March 27, 2021 – so for the next full year.
The CARES Act was designed to help protect consumers’ credit reports from the massive job loss and economic harm caused by COVID-19 business shutdowns. The idea is to ensure that someone’s credit is not impacted by a temporary inability to pay bills. While the CARES Act is helpful for this, there are a couple gaping holes as explained below that will not protect everyone’s credit during these times.
Basically, this Act added a new subparagraph (F) to 15 U.S.C. Section 1681s-2(a)(1) of the Fair Credit Reporting Act (“FCRA”). This applies for anything that is a credit obligation including credit cards, auto debt, medical debt, home mortgages etc.
These temporary protections are only in effect for 120 days from March 27, 2020. A couple areas of concern are in bold below:
Most everyone has heard of the forbearance on student loan payments until September 30, 2020 due to COVID-19 – but like everything, there are nuances to this. I was fortunate to be interviewed to participate in Tiffany Connors’ very insightful article, 5 Questions to Ask Before Deciding if Student Loan Forbearance Can Help You” for the PennyHoarder which went up today.
Lots of good advice on whether forbearance applies to your loans, and the pros and cons of accepting it. I’ve been following PennyHoarder for years and it’s a great publication for those wanting to become debt free and live an independent life! In fact, I’m typing this blog now while camping at Fort DeSoto in Pinellas County, Florida – my husband is out paddle boarding but since it’s near 90 out at noon, I’d really rather be doing this! But I do like looking out over the water!
Also there are more helpful tips on using the CARES Act to help manage your student loans appear in our past few blogs if you’d like to scroll back through a few.
I was super pleased to be interviewed recently on the radio show Money Talks. In our 4/29/20 radio interview, we spent approximately 30 minutes covering some things people can do to address debt during COVID-19. This includes student loan and mortgage forbearances and limitations under the CARES Act, discharging private student loans in bankruptcy, protecting and restructuring debt in a small business Chapter 11 under new rules and on and on. Take a listen. Maybe you’ll learn something you didn’t know before and can make this time work for you to reduce debt.
Please check out our News page where this interview is linked.
At Christie D. Arkovich, P.A., we understand what you are going through. We are committed to helping you reduce your debts and regain control of your finances while keeping your doors open.
Our attorneys have many years of bankruptcy experience, including Chapter 11 cases of all types. One of our attorneys also has an MBA, and her on the ground experience has helped many businesses over the years get back on their feet.
|Webinar: Why you should care about the CARES Act
May 20, 2020 at Noon
The Tampa Bay Bankruptcy Bar Association will be hosting a FREE Webinar via Zoom on May 20, 2020 from 12:00 to 1:30pm. Why you should care about the CARES Act and its impact on Student Loans, Foreclosure, Collection, and Consumer and Business Bankruptcy. Christie Arkovich, Jake Blanchard, Nicole Mariani Noel and Chapter 13 Trustee, Kelly Remick, will discuss provisions of the stimulus bill that expand or create options for Debtors in Chapter 13 cases as well as Small Business Debtors under Subchapter V and many more. Panelists will also discuss foreclosure, forbearance, collection and student loan impacts. No cost to attend. This will be a live webinar and will not be recorded. Register here.
Couldn’t come at a better time now that things are hoppin’ a bit more! I encourage our colleagues to register for local insight to help represent our clients the best we can in these trying times
The Student Borrower Protection Center and the National Consumer Law Center have combined forces and raised certain concerns to Secretary DeVos in a letter today that can be found here.
Clarifications are being made to the Paycheck Protection Program which have encouraged, in particular large cap, public companies, with access to other funds, to return funds that were meant for small business. Perhaps the attached recommended consumer guidance will encourage the Department of Education to clarify and extend borrower protections where necessary as well.