New SBA Guidance On PPP Eligibility for Individuals in Bankruptcy

New SBA Guidance On PPP Eligibility for Individuals in Bankruptcy

April 8, 2021 0 By Alan Wenokur

The Small Business Administration has issued new guidance on PPP loan eligibility for individuals or entities in bankruptcy. Any debtor in a bankruptcy case, or part-owner of a debtor, who is considering applying for a PPP loan needs to time the application to meet these eligibility considerations.

To be eligible for a PPP loan, an applicant must certify that the applicant and any owner of 20% or more of the applicant are not “presently involved in any bankruptcy.” So if an applicant or owner has filed for bankruptcy, when is that applicant or owner no longer “presently involved” in a bankruptcy and thus eligible for a PPP loan?

Here Is the SBA’s Position

  • An applicant or owner who has filed a Chapter 7 bankruptcy petition is considered to be “presently involved in any bankruptcy” for PPP eligibility purposes until the Bankruptcy Court has entered a discharge order in the case.
  • An applicant or owner who has filed a Chapter 11, 12 or 13 bankruptcy petition is considered to be “presently involved” until the Bankruptcy Court has entered an order confirming the plan in the case. And if the Bankruptcy Court has entered an order dismissing the case, regardless of chapter, the applicant or owner is no longer “presently involved in any bankruptcy.”
  • Discharge in a Chapter 7 case, plan confirmation in a Chapter 11, 12, or 13, or an order of dismissal, whichever is applicable, must occur before the date of the PPP loan application.
  • If an applicant has permanently closed as a result of the bankruptcy filing, the applicant is ineligible for a PPP loan because the applicant is required to certify on the PPP borrower application that the applicant “has not permanently closed.”

Learn More:

Seattle Bankruptcy and Business Law Attorneys

Do you have questions about PPP loans and bankruptcy? Contact the experienced Seattle bankruptcy and business law attorneys at Wenokur Riordan PLLC today at (206) 724-0846 to discuss your situation.