Alexandria, Va. — The American Bankruptcy Institute (ABI) sent a letter to congressional leadership today requesting Congress to make it clear in any future amendments or legislation addressing Paycheck Protection Program (PPP) funding that debtors who have filed bankruptcy cases remain eligible for PPP loans, notwithstanding their respective bankruptcy filings. “ABI is not advocating that Congress mandate PPP assistance to any particular borrower, or category of borrowers, in a case pending under the Bankruptcy Code,” ABI Executive Director Amy Quackenboss writes in the letter. “However, it is imperative that bankruptcy debtors remain eligible for PPP funding if they otherwise satisfy the borrowing requirements. PPP funding may facilitate a successful reorganization under the Bankruptcy Code, and it certainly facilitates the PPP’s goals, which include the preservation of paying jobs.”

Click here to read ABI’s letter.

PPP loans, created as part of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), have served as a lifeline to many small businesses who have suffered economic distress as a result of the COVID-19 pandemic and resulting shutdown. The Small Business Administration (SBA) issued a ruling on April 24, 2020, that effectively made otherwise-eligible debtors in bankruptcy ineligible for a PPP loan. “We do not intend to comment on the legality of that ruling, which is currently being litigated in courts across the country, but instead, we write to request that Congress (i) consider the negative policy implications of the SBA’s ruling, and (ii) clarify in future legislation that otherwise-deserving small businesses, family farmers and individuals are eligible to receive PPP funds notwithstanding their pending bankruptcy cases,” Quackenboss said in the letter.

“It is unclear why the SBA determined that persons or entities ‘presently involved in any bankruptcy’ are ineligible for PPP assistance,” according to the letter. “In our view, this provision unnecessarily discriminates against debtors in bankruptcy.”

While urging congressional consideration of the issues presented, ABI is not taking a position or commenting on any legislation in which PPP loans may be addressed by Congress. 

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ABI is the largest multi-disciplinary, nonpartisan organization dedicated to research and education on matters related to insolvency. ABI was founded in 1982 to provide Congress and the public with unbiased analysis of bankruptcy issues. The ABI membership includes nearly 11,000 attorneys, accountants, bankers, judges, professors, lenders, turnaround specialists and other bankruptcy professionals, providing a forum for the exchange of ideas and information. For additional information on ABI, visit www.abiworld.org.