COVID-19 Relief Law - Farmers in Chapter 12 Ineligible for PPP Loans
The Coronavirus Aid, Relief, and Economic Security (“CARES Act") established a relief measures to help combat the economic impact of COVID-19. The PPP established through the SBA has announced guidance for farmer's eligibility for PPP loans during a Chapter 12 bankruptcy.
In the SBA’s Fourth Interim Final Rule, posted to its website on April 24, 2020, the SBA stated in a "Q&A" that a business would not be approved for a PPP loan if the business was in bankruptcy. The rationale given was that making a PPP loan to an applicant in bankruptcy would be too risky.
Chapter 12 was designed as a response to the unique financial difficulties that farmers face. Chapter 12 is conceptually and statutorily similar to other reorganization-type bankruptcies, but provides more flexibility in making periodic payments to take into account the seasonal nature of many farming or fishing operations. Under Chapter 12, the debtor proposes a repayment plan that lasts three to five years. Chapter 12 is also less expensive and, in many respects, less complex than other forms of reorganization bankruptcy.
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