Bankrupt Debtors Fight for PPP Lifeline in COVID-19 Era

Faegre Drinker co-chair Andrew Kassner and senior attorney Joseph Argentina coauthored the article “Bankrupt Debtors Fight for PPP Lifeline in COVID-19 Era,” which originally appeared in the July 9, 2020, edition of The Legal Intelligencer.

In their previous article, the authors looked at how bankruptcy courts are addressing post-petition retail rent obligations differently during the pandemic under Sections 105 and 365 of the Bankruptcy Code. In “Bankruptcy Debtors Fight for PPP Lifeline in COVID-19 Era,” Kassner and Argentina examine another provision of the Bankruptcy Code — Section 525 — the anti-discrimination section, and its implications during the pandemic.

The article highlights that since the Small Business Administration (SBA) issued regulations that disqualified Chapter 11 debtors from participating in the government’s paycheck protection program (PPP), several debtors have sought emergency injunctions to compel the SBA to process their loan applications notwithstanding their ongoing bankruptcy cases. Kassner and Argentina note that so far the results have been mixed, as some courts have directed the SBA to process the applications, and others uphold the SBA’s exclusion of bankrupt debtors from the PPP lifeline.