ARE PPP AND OTHER FEDERAL PANDEMIC LOANS DISCHARGEABLE IN BANKRUPTCY?

Many self-employed individuals have relied on PPP and other Federal pandemic loans to rescue their businesses from going under during and because of the pandemic. If you notice, many restaurants that we go to pre pandemic have shuttered up permanently despite using up PPP and other Federal pandemic loans. Sure the PPP loans helped a lot to keep employees employed, and for the business to continue paying rent for the premises, but lockdown after lockdown have decimated a lot of restaurants. What can the business owner do if revenues are cut by more than half? In fact, some businesses had zero revenue, from $100K a month of gross receipts down to almost nothing.

Will Uncle Sam come to collect PPP loans?

Soon enough, Uncle Sam will start collecting on the PPP loans. I have 4 clients who are already in this situation. Maybe they can ask for debt forgiveness first for the PPP loans since that’s a feature of these loans. There’s certainly a 50/50 chance that all or a portion may get forgiven; but what about the rest of it, or all of it that is not forgiven? Can bankruptcy wipe out or discharge the PPP loans?

To answer this question, we refer to Section 523 of the bankruptcy code. It provides for exceptions to discharge. If PPP loans are excepted from discharge by Section 523, then it’s not dischargeable. Nothing in Section 523 as it is currently worded suggests that PPP loans are excepted from discharge. Therefore, PPP loans are dischargeable in bankruptcy.

$100K PPP loan obtained in 2020

Debtor owns a restaurant that obtained a $100K PPP loan in 2020. He used the $100K to buy brand new Mercedes Benz S500, fully loaded. Can he discharge his PPP in bankruptcy? No he cannot. Why not? Section 523 excepts from discharge loans that were “fraudulently” obtained by debtor. Obviously, if debtor had indicated in the PPP loan application that he was going to use the PPP loan to buy an expensive car, Uncle Sam would not have given him the loan. But his PPP loan application stated that he was going to use the $100K to continue running his restaurant, specifically the funds were going to be used to pay rent and to pay employees, that’s why Uncle Sam gave him the PPP loan.

But let’s say, debtor actually used the $100K PPP loan to pay his employees and to pay rent for the premises. With the $100K, he was able to continue operating at a loss for two years. Now that it’s 2022, the pandemic is still around but there’s no more lockdown. His restaurant does take outs and allows some indoor dining, but sales are still way low and he doesn’t have any more money to continue operating. He decides finally to shut the door and stop operating. But here comes Uncle Sam knocking on his door, asking him to pay back the $100K. What should he do?

As I said, he can ask for loan forgiveness for all or part of the $100K since he actually used the $100K to pay employees and rent, to keep the business going for 2 years. Whatever is not forgiven, he can use bankruptcy to discharge because PPP loans are not excepted from discharge.

PRAYING ALWAYS HELPS

It also helps to pray to our God, Jesus and the Blessed Mother Mary for divine protection against the virus, and financial problems, because we have a God who loves us and showers us with infinite mercy. All we have to do is humble ourselves and pray.

What is the current proof that God and Jesus are divine and all powerful? I refer you to exhibit A, the incorruptible body of Carlo Acutis!

CURRENT ONGOING PHYSICAL PROOF GOD IS ALMIGHTY

INCORRUPTIBLE BODY OF CARLO ACUTIS DIED 2007 AT AGE OF 15

Look at the incorruptible body of the blessed Carlo Acutis who died at 15 in 2007. You can look at his body in Rome, Italy, now 14 years after his death. He looks like he’s just asleep in his jogging suit and rubber shoes!  That is a perfect example of an ongoing sign on earth that the God of Moses, our God, my God, is almighty and all-powerful that He even suspends the natural laws of biology and physics without any effort. He resurrected His one and only beloved son from death on the cross. Indeed, He has power over death.

I have actually thought, “What would the other religions believe if they actually saw the incorruptible body of the blessed Carlo Acutis? I think even Buddha, if he were alive today, would truly believe that Yahweh is the one True God.” No need to think about reincarnation and nirvana because his incorruptible body is available for all to see in Rome, Italy. We won’t need any kind of explanation on the efficacy of modern day mummification. Come on, man, that’s all bull. The truth is in plain sight. Believe your own eyes, that the one true God is all-powerful and His name is Yahweh, “I am who am.” He is the alpha and the omega, the beginning and the end.

Seven of my high school classmates passed away in 2021. They have all gone to meet their creator. I would like to mention their names here: Ricardo A, Victor Y, Jerry L, George C, Jimmy G, Edward N and Ricardo D. Three died of co-vid, one slipped and fell in the bathroom, one of heart attack, two of cancer. I pray all of them are in heaven with our Lord enjoying eternity with their loved ones.

Disclaimer: None of the foregoing is considered legal advise for anyone. There is absolutely no attorney client relationship established by reading this article.

“DON’T WORRY ABOUT ANYTHING. INSTEAD, PRAY ABOUT EVERYTHING.” PHILIPPIANS 4:6

Lawrence B. Yang is a graduate of Georgetown University with a Master’s Degree in Law and specializes in Bankruptcy, Business, Real Estate and Civil Litigation.  He speaks English, Mandarin and Fujian and has successfully represented thousands of clients in California, including companies overseas.  Please call Angie, Barbara or Jess at (626) 284-1142 for an appointment at 20274 Carrey Road, Walnut, CA 91789 or1000 S. Fremont Ave., Mailstop 58, Building A-10 South Suite 10042, Alhambra, CA 91803.