COVID-19: Bankruptcy Code Amendments in the Consolidated App

COVID-19: Bankruptcy Code Amendments in the Consolidated Appropriation Act and COVID-19 Bankruptcy Relief Extension Act | K&L Gates LLP


On March 27, 2021, President Biden signed into law the
COVID-19 Bankruptcy Relief Extension Act (the Extension Act). The Extension Act temporarily extends certain COVID-19 bankruptcy relief provisions enacted as part of the
Coronavirus Aid, Relief, and Economic Security Act (the CARES Act), which were further amended and/or extended as part of the
Consolidated Appropriations Act (the CAA). Certain of the amendments included in the CAA and the Extension Act are highlighted below:
Debtors and Paycheck Protection Program Loans
Under the CARES Act, Congress established the Paycheck Protection Program (PPP) administered by the Small Business Administration (SBA), whereby businesses may obtain loans that would be forgiven if the borrowers used the funds for certain permitted purposes. The SBA promulgated a rule declaring debtors in bankruptcy ineligible for PPP loans. Debtors across the country have challenged this rule. The CAA attempts to address this issue by expressly authorizing certain debtors in bankruptcy to obtain PPP loans only if the SBA Administrator sends a letter to the Director of the Executive Office for United States Trustees approving the rule change. If the SBA Administrator delivers such letter, PPP funds will be available (a) in cases filed after the date of the delivery of the letter and (b) to Subchapter V small-business debtors, chapter 12 family farmer and fishermen debtors, and self-employed chapter 13 debtors. To date, the SBA Administrator has yet to deliver the letter. This provision sunsets under the CAA on 27 December 2022.

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