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Senator Elizabeth Warren has introduced a law to radically change the consumer bankruptcy practice entitled the Consumer Bankruptcy Reform Act of 2020.
This revolutionary document would make dramatic changes to bankruptcy practice.

1. Chapter 7 and 13 is eliminated and replaced with a single system called Chapter 10.
2. Student Loan debts become dischargeable just like any other debt.
3. Discharges are issued immediately upon confirmation of payment plans instead of waiting until all payments are made.
4. Discharges would be issued without the requirement of a payment plan (what Chapter 7 currently offers) to families whose income is less than 130% of the median income for their state.  For a Nebraska family of 4, the current median income level is $96,749, so debtor’s whose family income is less than $125,773 would be eligible for immediate discharge in Chapter 10.  For a single debtor the income cutoff would be $66,101.
5. Credit counseling requirements are eliminated.
6. Past due rent payments are discharged but landlords may not terminate the lease as long as future rent is paid on time.
7. Telephone/Zoom Court hearings. Debtors would no longer have to attend the required trustee meeting in person and the meeting must not conflict with a debtor’s work schedule.
8. Spending habits become irrelevant: Bankruptcy courts would no longer focus on how a debtor spends their money. Rather, median income levels would determine the amount paid back to unsecured creditors with few debtors having to pay back anything at all.
9. Three types of payments plans are created: Repayment Plans for unsecured debts.  Residence Plans for delinquent mortgage payments.  Property Plans for non-mortgage secured debts, like cars or furniture.  A debtor may be enrolled in three plans at the same time.
10. Attorney fees may be paid after the case is filed, but attorneys may not sell their unpaid fees for quick cash.
11. Trustees may not dismiss unpaid cases but rather must enforce a lien. In current chapter 13 cases, a debtor who fails to pay monthly payments may have their case tossed out of court without a discharge.  New Chapter 10 instead issues an immediate discharge upon plan confirmation and gives the trustee a judgment lien that the trustee may use to enforce the plan, which basically requires the trustee to sue and garnish the debtor.
12. Federal property exemption laws would apply to all cases and allow an individual to shield $30,000 of personal property from creditors.

The Chapter 10 proposal is revolutionary to the core.  This is a radical manifesto that would rip through consumer bankruptcy practice. And, unfortunately, because of its radicalness, it probably has zero chance of ever being enacted into law and squanders the current opportunity to achieve real bankruptcy reform.
What is also clear about this proposal which was endorsed by 74 law school bankruptcy professors, is that it rejected any input from those professionals, judges, trustees and attorneys engaged in consumer bankruptcy practice.
There are so many problems with this proposed law that it is hard to begin.  Here is a short sampling of some of the obvious defects of this political manifesto.

• Student Loans.  Is it really wise or fair to allow students to discharge their entire student loan debt two seconds after they graduate college? Wouldn’t it be wiser to delay eligibility for student loan discharges for a period of 10 or more years? I cannot see how voters would approve of allowing privileged college students to immediately discharge taxpayer subsidized education without making any effort to repay a single dime of debt.
• 130% of Median Income Qualification.  Under current consumer bankruptcy law, the court may require a debtor who clearly can afford to repay some or all of their debt to enter a payment plan.  Not so with chapter 10.  Under chapter 10 we no longer review a debtor’s spending choices or ability to pay.  Rather, we only require debtors with income over 130% of median income levels to pay back anything to unsecured creditors.  Under this rule the vast majority of higher income debtors who currently must offer payment to creditors would immediately qualify for a no payment case.  Would voters approve of that change?
• Unpaid Rent Dischargeable.  Chapter 10 proposes that past due rent be dischargeable but that landlords be forced to continue the lease as long as future rent is paid on time. But doesn’t this just encourage debtors who must file bankruptcy to stop paying rent knowing that they can stop evictions and skip paying past due rent when the bankruptcy is filed? Will this cause landlords to increase the amount of security deposits charged to all renters?
• Mass Resignation of Trustees.  I would anticipate that the majority of trustees now serving in chapter 7 and 13 cases would consider resignation if chapter 10 were passed. Why?  Chapter 13 trustees who mange payment plans could no longer dismiss cases for nonpayment but would rather be required to enforce a judicial lien through garnishments. Is that feasible? Probably not. Chapter 7 trustees could almost never claim property under chapter 10 since new federal exemptions would protect almost every debtor’s property.  And since trustee meetings must now be scheduled when they do not interfere with a debtor’s work schedule, do we really expect trustees to conduct meetings during evening hours or weekends? This is madness!
• Attorney Fees.  The chapter 10 proposal to allow attorneys to collect fees after this case is filed is sensible, but this proposal prohibits attorneys from selling their unpaid fees to investors.  What these law professors do not seem to understand is that this proposal changes nothing since the risk of not being paid has not changed.  Bankruptcy attorneys are not going to start filing complicated cases on an installment plan just because they are allowed to.  Only the most financially stable debtors will be able to take advantage of this change, but for lower-income debtors the attorneys will still have to collect all their fees up front since the risk of not being paid is not alleviated.  That is why allowing attorneys to factor their receivables is actually a good thing for lower-income debtors since it encourages attorneys to file cases for little money down if a market for their unpaid receivables exist.  Rather than outlawing the selling of receivables the better option is to allow the US Trustee and the courts to review the factoring arrangement for reasonableness.  When law professors and lawmakers fail to gather input from those who actually prepare cases, this is the type of misguided legislation that results.
• Enforcement of Payment Plans.  Under the current payment plans offered in Chapter 13, the failure to make payments will result in a dismissal of the case.  Not so with Chapter 10.  Rather, the Discharge of debts is immediate upon plan confirmation and the bankruptcy trustee is given a Judgment Lien to enforce payment.  This is completely unrealistic. Bankruptcy trustees are not going to take the extraordinary steps to garnish debtors who fail to make the bankruptcy payment.  Honest but unfortunate debtors lose jobs and relocate frequently.  Tracking down judgment debtors is a difficult and expensive process.  Bankruptcy trustees depend on a steady flow of payments to fund their office, and taking away the power to dismiss cases will result in a devastating cash flow crisis that will cause trustees to resign from office at alarming rates.  The only reason a majority of debtors make the monthly bankruptcy payment is the fear that a dismissed case will allow creditors to resume garnishments and foreclosures.  Take away that fear and payments to trustees will slow overnight.
• $30,000 Property Exemption.  The proposal to give every debtor a $30,000 property exemption will virtually eliminate a claim of assets in the vast majority of cases. As a result, income for bankruptcy trustee’s will decline substantially.  Several chapter 7 trustees tell me that their profits have shrunk considerably over the years due to greater reporting duties imposed on them and from greater property exemption laws approved by state legislatures.  Some trustee’s say they make little to no income from their trustee duties and they already question why they keep the job.
• Remote 341 Hearings.  I fully endorse the concept of making remote Section 341 meetings with the trustee permanent.  Since COVID-19 these hearings are currently conducted via telephone conference calls, and the process is working well.  However, the new requirement that the hearings not conflict with a debtor’s work schedule is just nonsense.  These hearings only take a few minutes to complete and the debtor is given a month advance notice of the hearing date.  Many debtors complete these hearings on a cell phone by taking a half-hour break from work.  If necessary the hearing are rescheduled if the debtor is not able to attend.  To require that trustees conduct meetings when the debtor is off work in the evening or on weekends is insane.  Trustees will resign before they agree to this.
• Post-Petition Mortgage Payments.  When a debtor falls behind on mortgage payments after a case is filed, the bank will normally file a Motion for Relief from the Automatic Stay when three or four payments are missed.  The proposed Chapter 10 law says that creditors may not take advantage of state law enforcement procedures until a post-petition mortgage payment is 120 days past due.  So does this mean that the automatic bankruptcy stay is automatically lifted when payments are 120 days past due? If so, this represents a great weakening of the protection to homeowners.  In chapter 13 cases the banks don’t even request relief until a loan is 60 to 120 days delinquent, and when that happens we routinely work out payment plans to cure the default over 6 months.  Under Chapter 10, however,  no such repayment agreements are available if the bank just waits until an account is 120 days past due.  This is less protection.
• Median Income Calculations.  Chapter 10 still requires debtors to submit six months of paystubs and other income verification documents to their attorneys to determine their median income level.  What???  This is horrible. Do these law professors have any idea how difficult it is to obtain six months of financial records? This is what the Bankruptcy Reform Act of 2005 imposed and it directly resulted in the cost of bankruptcy cases to double and triple.  It is so obvious that the writers of this legislation have never actually prepared a bankruptcy case.  Why is it necessary for a minimum wage worker to submit a six-month income calculation when it is perfectly obvious from their last paystub and tax return that that only earn minimum wage? Such debtors do not keep paystubs and they change jobs frequently. The nightmare of collecting income documents stays the same under this “reform” bill.

I remember preparing bankruptcy cases prior to the Bankruptcy Reform Act of 2005. Bankruptcy fees were cheap and we didn’t have to collect six months of paystubs or bank statements or tax returns.  But we did have to prove up on every case and explain how we determined a debtor’s income.  Bankruptcy trustees did a good job of reviewing monthly budgets and they frequently pushed higher income debtors out of chapter 7 if they felt a payment could be made to creditors.
In some ways the practice before 2005 was too lax. It does make sense to require debtors to submit a recent paycheck stub, tax return and bank statement to the trustees for review.  It does make sense to impose a duty on bankruptcy attorneys to verify the accuracy of the petition they file.  Some reforms were overdue, but the reform act of 2005 was 99% punitive and unwise.  The law was so poorly drafted that it took a decade of court appeals to figure out what it even said.
The Bankruptcy Reform Act of 2020 is some of the worst written law I have ever read.  This legislation would destroy the current system and lead to mass confusion and trustee resignation. The drafters of the legislation seem not to see how vague and uncertain it’s provisions are and this will lead to massive litigation to figure out what he darn document says, just like the 2005 reform bill did.  But what is worse, 40 years of case law interpreting chapter 13 cases will be through into the trash and courts will struggle to interpret the mechanics of the new law.
Bankruptcy attorneys will, however, greatly benefit from the confusion this new law will usher in.  Bankruptcy fees will soar with the complexity of these cases while immediate discharge orders will make them seem like magicians to their clients who are ostensibly immune from not making required payments.  This law is nothing less than a radical economic manifesto that no sensible Congress should ever consider enacting into law.
 
Image courtesy of Flickr and Mark Ramsay

Find The Right Bankruptcy Lawyer For You
Reprint from a great California bankruptcy attorney – Cathy Moran
Picking  the  right bankruptcy lawyer  is a lot like picking the right head coach for a sports team.
It doesn’t assure success, but without the right professional, success is a whole lot harder to come by.
Bankruptcy is a specialized area of law that can be far more complex than appears on the surface. The issues are not always obvious or simple.
It is not just about filling out forms.

• Assessing whether you should file and when is critical.
• Your assets and your financial future are at stake.

While price is the easiest selector,  it  is not a good basis for choosing a bankruptcy lawyer.
So, how do you find a reliable professional?
What’s important in a lawyer
Bankruptcy is a field where empathy and communication skills are as important as knowledge of the law.
Pick a lawyer who can help you work through the issues, alternatives, and implications of your choices.

• Pick a lawyer with whom you are comfortable, one whom you can ask questions and get responses you understand.
• Pick a lawyer who either specializes in bankruptcy or does a large part of his/her practice in the field.
• Ask questions until you understand what your choices are.
• Don’t be afraid to interview a lawyer and leave without retaining the lawyer.

Finding that lawyer
Look for a certified specialist or a lawyer with substantial experience in bankruptcy.
A  generalist may be able do a simple bankruptcy, but may not be able to tell if your case is truly “simple”.
Local bar associations have referral panels of bankruptcy lawyers.  Find them in your phone book.
Interview lawyers until you find one who suits you.  Ask about their experience with cases like yours. Ask how many cases he/she handles a year, and the length of time he/she has been practicing bankruptcy law.
Find someone with whom you communicate well.
Get agreement in writing
Understand what services are included in the quoted fee.  Does it include

• lien avoidance matters ?
• disputes with the trustee?
• non dischargeability actions?

Usually, the flat fee covers only the standard services or the foreseeable issues in a bankruptcy case.  Some things, like whether there will be a challenge to the discharge of a certain debt, can’t be foreseen at the beginning of the case, and may therefore trigger further fees.
Exploit your lawyer’s expertise
Disclose everything about your financial condition.  Without all the information, your rights cannot be protected.
All too often, information that a client withholds because they think it is troublesome presents no problem, if disclosed.  Failing to tell the whole truth can create a problem where none existed before.
Read carefully the representation agreement, the draft schedules, the court’s notices and communications from your lawyer.  Ask questions if you don’t understand at first;  inaccurate or incomplete information can have serious and unpleasant consequences.
Provide promptly information and feed back when requested so that court deadlines can be met.
Take responsibility for your case.  You are the person with the best handle on the facts of the case and the one most affected by the case’s outcome.  Your lawyer can file a bankruptcy with you, but not for you.
Read more

• Do you need to file?
• Excuses not to file
• Filing bankruptcy
• Bankruptcy myths
• The ABC’s of bankruptcy

More extensive discussion of finding and interviewing a bankruptcy lawyer.
Image © corbisrffancy – Fotolia.com

.fusion-body .fusion-builder-column-1{width:100% !important;margin-top : 0px;margin-bottom : 0px;}.fusion-builder-column-1 > .fusion-column-wrapper {padding-top : 0px !important;padding-right : 0px !important;margin-right : 1.92%;padding-bottom : 0px !important;padding-left : 0px !important;margin-left : 1.92%;}@media only screen and (max-width:980px) {.fusion-body .fusion-builder-column-1{width:100% !important;}.fusion-builder-column-1 > .fusion-column-wrapper {margin-right : 1.92%;margin-left : 1.92%;}}@media only screen and (max-width:640px) {.fusion-body .fusion-builder-column-1{width:100% !important;}.fusion-builder-column-1 > .fusion-column-wrapper {margin-right : 1.92%;margin-left : 1.92%;}}@media only screen and (max-width:980px) {.fusion-title.fusion-title-1{margin-top:15px!important;margin-bottom:0px!important;}}@media only screen and (max-width:640px) {.fusion-title.fusion-title-1{margin-top:10px!important;margin-bottom:10px!important;}}MUSINGS BY DIANE:“CHEAP” or “EASY” does not mean it is the best way to do something or to hire someone.  You can take a shortcut to fix your roof, but it will still leak in a few months.  The cost to fix something after it is done incorrectly is much more expensive than to do it correctly the first time. 
Never choose a professional based solely in price because you will always find bad professionals willing to do a terrible job, but hope you are stupid enough not to realize the problems they are creating until it is too late.  For instance, once the bankruptcy is filed it is probably too late to get out of it.  Just like you should check out the licensing agencies for your contractor, doctor or plumber, you should also check out the State Bar for your prospective attorney.  Also, look at reviews, but understand bad professionals will have fake reviews.  I don’t say any of this to scare you, only to make sure you know the importance of taking your time to find good professionals.

@media only screen and (max-width:980px) {.fusion-title.fusion-title-2{margin-top:0px!important;margin-bottom:6px!important;}}@media only screen and (max-width:640px) {.fusion-title.fusion-title-2{margin-top:10px!important;margin-bottom:10px!important;}}– Diane L. Drain.fusion-body .fusion-builder-column-2{width:100% !important;margin-top : 0px;margin-bottom : 0px;}.fusion-builder-column-2 > .fusion-column-wrapper {padding-top : 0px !important;padding-right : 30px !important;margin-right : 1.92%;padding-bottom : 0px !important;padding-left : 45px !important;margin-left : 1.92%;}@media only screen and (max-width:980px) {.fusion-body .fusion-builder-column-2{width:100% !important;order : 0;}.fusion-builder-column-2 > .fusion-column-wrapper {margin-right : 1.92%;margin-left : 1.92%;}}@media only screen and (max-width:640px) {.fusion-body .fusion-builder-column-2{width:100% !important;order : 0;}.fusion-builder-column-2 > .fusion-column-wrapper {margin-right : 1.92%;margin-left : 1.92%;}}.fusion-body .fusion-flex-container.fusion-builder-row-2{ padding-top : 0px;margin-top : 0px;padding-right : 0px;padding-bottom : 0px;margin-bottom : 0px;padding-left : 0px;}.fusion-button.button-1 {border-radius:10px;}.fusion-button.button-1.button-3d{-webkit-box-shadow: inset 0px 1px 0px #fff,0px 5px 0px #003d00,1px 7px 7px 3px rgba(0,0,0,0.3);-moz-box-shadow: inset 0px 1px 0px #fff,0px 5px 0px #003d00,1px 7px 7px 3px rgba(0,0,0,0.3);box-shadow: inset 0px 1px 0px #fff,0px 5px 0px #003d00,1px 7px 7px 3px rgba(0,0,0,0.3);}.button-1.button-3d:active{-webkit-box-shadow: inset 0px 1px 0px #fff,0px 5px 0px #003d00,1px 7px 7px 3px rgba(0,0,0,0.3);-moz-box-shadow: inset 0px 1px 0px #fff,0px 5px 0px #003d00,1px 7px 7px 3px rgba(0,0,0,0.3);box-shadow: inset 0px 1px 0px #fff,0px 5px 0px #003d00,1px 7px 7px 3px rgba(0,0,0,0.3);}Click here for steps to your free bankruptcy consultation
.fusion-body .fusion-builder-column-4{width:25% !important;margin-top : 0px;margin-bottom : 20px;}.fusion-builder-column-4 > .fusion-column-wrapper {padding-top : 0px !important;padding-right : 0px !important;margin-right : 10px;padding-bottom : 0px !important;padding-left : 0px !important;margin-left : 10px;}@media only screen and (max-width:980px) {.fusion-body .fusion-builder-column-4{width:100% !important;order : 0;}.fusion-builder-column-4 > .fusion-column-wrapper {margin-right : 10px;margin-left : 10px;}}@media only screen and (max-width:640px) {.fusion-body .fusion-builder-column-4{width:100% !important;order : 0;}.fusion-builder-column-4 > .fusion-column-wrapper {margin-right : 10px;margin-left : 10px;}}

• Nothing is More Expensive Than Hiring a Cheap Attorney
• Leading Attorneys Share Thoughts on Mispresentations by Media
• How Debt Makes You Stupid
• 10 Things You Need to Know Before Filing Bankruptcy

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CFPB and State Attorneys General Settle with Nationstar, aka Mr. Cooper, accused of unfair and deceptive practices
On December 7, 2020, the Consumer Financial Protection Bureau (Bureau) filed a complaint and proposed stipulated judgment and order against Nationstar Mortgage, LLC, which does business as Mr. Cooper (Nationstar). The Bureau alleges that Nationstar violated multiple Federal consumer financial laws, causing substantial harm to the borrowers whose mortgage loans it serviced, including distressed homeowners. Nationstar is one of the nation’s largest mortgage servicers and the largest non-bank mortgage servicer in the United States. The proposed judgment and order, which the court entered on December 8, 2020, requires Nationstar to pay approximately $73 million in redress to more than 40,000 harmed borrowers. It also requires Nationstar to pay a $1.5 million civil penalty to the Bureau. Attorneys general from all 50 states and the District of Columbia and bank regulators from 53 jurisdictions covering 48 states and Puerto Rico, the Virgin Islands, and the District of Columbia settled with Nationstar the same day and their settlements are reflected in separate actions, concurrently filed in the United States District Court for the District of Columbia. The orders in the Bureau’s and the States’ actions have yielded nearly $85 million in recoveries for consumers to date and over $6 million more in fees and penalties. They are also part of a larger government effort, which also includes assistance from the Special Inspector General for the Troubled Asset Relief Program (SIGTARP) and the United States Trustee Program, to address Nationstar’s alleged unlawful mortgage loan servicing practices.

To read the complaint and Stipulated Judgment and Order click below:

• Stipulated judgment and order 
• Complaint 

.fusion-body .fusion-builder-column-1{width:100% !important;margin-top : 0px;margin-bottom : 0px;}.fusion-builder-column-1 > .fusion-column-wrapper {padding-top : 0px !important;padding-right : 0px !important;margin-right : 1.92%;padding-bottom : 0px !important;padding-left : 0px !important;margin-left : 1.92%;}@media only screen and (max-width:980px) {.fusion-body .fusion-builder-column-1{width:100% !important;}.fusion-builder-column-1 > .fusion-column-wrapper {margin-right : 1.92%;margin-left : 1.92%;}}@media only screen and (max-width:640px) {.fusion-body .fusion-builder-column-1{width:100% !important;}.fusion-builder-column-1 > .fusion-column-wrapper {margin-right : 1.92%;margin-left : 1.92%;}}@media only screen and (max-width:980px) {.fusion-title.fusion-title-1{margin-top:15px!important;margin-bottom:0px!important;}}@media only screen and (max-width:640px) {.fusion-title.fusion-title-1{margin-top:10px!important;margin-bottom:10px!important;}}MUSINGS BY DIANE:Nationstar, aka Mr. Cooper, is one of the largest mortgage servicers in the country.  Why they find it necessary to defraud their customers is beyond me.  Read the complaint filed by the Consumer Financial Protection Bureau, which mirrors the complaints filed by all the State Attorney Generals.  According to the complaint Nationstar : (1) failed to identify thousands of loans with existing in-flight modifications and, as a result, failed to recognize some transferred loans with pending loss mitigation applications or trial modification plans, or failed to identify and honor other borrowers’ loan modification agreements; (2) foreclosed on borrowers to whom it had promised foreclosure holds while they applied for loss mitigation relief; (3) improperly increased
borrowers’ permanent, modified monthly loan payments; (4) failed to timely disburse borrowers’  tax payments from their escrow accounts; (5) failed to properly conduct escrow analyses for borrowers during their Chapter 13 bankruptcy proceedings; and (6) failed to timely remove private mortgage insurance from borrowers’ accounts. Each of these acts or failures violated the law. 
By now you are very tired of me asking “why”.  Why does a wealthy and powerful company find it necessary to prey on the least able to protect themselves?  Do you think Nationstar is going to pull millions of dollars out of their pockets to pay these fees and penalties?  Think about it!

@media only screen and (max-width:980px) {.fusion-title.fusion-title-2{margin-top:0px!important;margin-bottom:6px!important;}}@media only screen and (max-width:640px) {.fusion-title.fusion-title-2{margin-top:10px!important;margin-bottom:10px!important;}}– Diane L. Drain.fusion-body .fusion-builder-column-2{width:100% !important;margin-top : 0px;margin-bottom : 0px;}.fusion-builder-column-2 > .fusion-column-wrapper {padding-top : 0px !important;padding-right : 30px !important;margin-right : 1.92%;padding-bottom : 0px !important;padding-left : 45px !important;margin-left : 1.92%;}@media only screen and (max-width:980px) {.fusion-body .fusion-builder-column-2{width:100% !important;order : 0;}.fusion-builder-column-2 > .fusion-column-wrapper {margin-right : 1.92%;margin-left : 1.92%;}}@media only screen and (max-width:640px) {.fusion-body .fusion-builder-column-2{width:100% !important;order : 0;}.fusion-builder-column-2 > .fusion-column-wrapper {margin-right : 1.92%;margin-left : 1.92%;}}.fusion-body .fusion-flex-container.fusion-builder-row-2{ padding-top : 0px;margin-top : 0px;padding-right : 0px;padding-bottom : 0px;margin-bottom : 0px;padding-left : 0px;}.fusion-button.button-1 {border-radius:10px;}.fusion-button.button-1.button-3d{-webkit-box-shadow: inset 0px 1px 0px #fff,0px 5px 0px #003d00,1px 7px 7px 3px rgba(0,0,0,0.3);-moz-box-shadow: inset 0px 1px 0px #fff,0px 5px 0px #003d00,1px 7px 7px 3px rgba(0,0,0,0.3);box-shadow: inset 0px 1px 0px #fff,0px 5px 0px #003d00,1px 7px 7px 3px rgba(0,0,0,0.3);}.button-1.button-3d:active{-webkit-box-shadow: inset 0px 1px 0px #fff,0px 5px 0px #003d00,1px 7px 7px 3px rgba(0,0,0,0.3);-moz-box-shadow: inset 0px 1px 0px #fff,0px 5px 0px #003d00,1px 7px 7px 3px rgba(0,0,0,0.3);box-shadow: inset 0px 1px 0px #fff,0px 5px 0px #003d00,1px 7px 7px 3px rgba(0,0,0,0.3);}Click here for steps to your free bankruptcy consultation
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• Nationstar Mortgage to Pay 1.7 M for Failure to Report Accurate Loan Data
• Reverse Mortgages – why Seniors Lose Their Home
• CFPB Takes Action Against Wells Fargo and Chase for Illegal Morgage Kickbacks
• Mortgage Closing Scams: How to Protect Your Money

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The Paycheck Protection Program (the second round):

On December 27, 2020 a new bill was signed into law, now referred to as the Consolidated Appropriation Act of 2021, or ‘CAA’, This bill is 5,593 pages long (knowing how the legislative process works, there is no a single person involved who knows the entire bill and the consequences of the various provisions).  Only time will tell how this new law will help or hurt us.

The PPP funding is a very small part of the entire Consolidated Appropriation Act and will be important to all businesses, including mine.  This second round of funding for businesses, is referred to as PPP2.  Businesses who applied for the first round (PPP1) can apply for additional funds under PPP2.

The following is a summary from Steven Goldstein and Joe Keene, of Sacks Tierney and is reprinted for educational purposes only.

PPP Loan Program
The new law includes renewed funding of $325 billion for small business loans, including $284 billion for the Paycheck Protection Program (PPP), providing forgivable loans to first- and second-time small business borrowers. The new round of PPP loans, referred to as PPP2, will be available to first-time qualified borrowers and for businesses that previously received a PPP loan. Previous PPP loan recipients may apply for another loan of up to $2 million (down from the $10 million maximum in the original PPP loan program), provided they meet the following criteria:

• Have 300 or fewer employees (the threshold for the original PPP loans was 500 employees)
• Have used or will use the full amount of their first PPP loan
• Can show a 25% gross revenue decline in any 2020 quarter compared with the same quarter in 2019.

PPP2 loans also will permit first time borrowers from the following groups:

• Businesses with 500 or fewer employees that are eligible for other SBA7(a) loans
• Sole proprietors, independent contractors, and eligible self-employed individuals
• Not-for-profits, including churches
• Accommodation and food service operations with fewer than 300 employees per physical location.

The costs eligible for PPP2 loans include those that were eligible under the original PPP loan program–payroll, rent, covered mortgage interest, and utilities—and now include an expanded list that consists of the following (original PPP loans can be used for these new eligible costs so long as the loan has not yet been forgiven):

• Certain expenditures for operations, such as payments for any business software or cloud computing service that facilitates business operations, product or service delivery, payroll processing and tracking expenses, or human resources expenses.
• Costs related to property damage and vandalism or looting due to public disturbances that occurred during 2020 that were not covered by insurance.
• Expenditures made to a supplier of goods for goods that are essential to the operations of the borrower at the time when the expenditure was made, and are made under a contract or purchase order that was in effect at any time before the covered period of the PPP loan (for perishable goods, the contract must be in effect before or at any time during the covered period of the PPP loan).
• Costs related to personal protective equipment, which includes a broader concept of that term, such as drive-through window facilities, physical barriers, or health screening capabilities.

Loan amounts remain up to 2.5 times average monthly payroll costs, as in the original loan program, except that eligible accommodation and food service operations can borrow up to 3.5 times their average monthly payroll costs. As with the original PPP loan program, to be eligible for full loan forgiveness, all borrowers will have to spend no less than 60% of the funds on payroll over a covered period of between 8 and 24 weeks.
The new law creates a simplified forgiveness application process for loans of $150,000 or less. Under that process, a borrower shall receive forgiveness if a borrower signs and submits to the lender a certification that is not more than one page in length, includes a description of the number of employees the borrower was able to retain because of the covered loan, the estimated total amount of the loan spent on payroll costs, and the total loan amount.
One of the most significant changes is to allow businesses to deduct the costs covered by their PPP loans on their federal tax returns, even if the PPP loan is forgiven. This supersedes IRS guidance that stated that expenses could not be deducted. It is important to note that this applies only to federal taxes; each state must determine if these costs can be deducted for state income tax purposes, and the approach to this likely will vary from state to state.
If a PPP loan borrower also received an EIDL loan, including a $10,000 advance on that loan, the borrower was required to deduct that advance from the amount of the PPP loan that is forgiven. This deduction requirement has been eliminated.
The new law also sets aside funds available to support first- and second-time PPP borrowers with 10 or fewer employees, first-time PPP borrowers that have recently been made eligible, and for loans made by community lenders.
Debtors and trustees in bankruptcy cases are now eligible to apply for a PPP2 loan, under the supervision and approval of the bankruptcy judge handling the bankruptcy case.
Other Provisions of Interest to Small Businesses
The new law includes several other provisions that impact small businesses:

• The current employee retention credit created under the CARES Act is extended until June 30, 2021. The credit also is expanded to include a 70 percent credit for up to $10,000 in creditable wages per quarter, and the requirement that gross receipts decline has been reduced to a 20 percent decline (it previously required a 50 percent reduction).
• The refundable payroll tax credits for paid sick and family leave, enacted in the Families First Coronavirus Response Act (FFCRA), is extended through the March 31, 2021. Employers who provide leave under the terms of FFCRA can continue to receive a federal tax credit for leave through that date. The law is unclear as to whether employers are required to provide leave under the FFCRA terms through that extended date.
• The new law includes a tax break for corporate meal expenses up to 100 percent (as opposed to the current cap of 50%), so long as the expenses are for food and beverages provided by a restaurant. This provision is effective for expenses incurred after December 31, 2020 and expires at the end of 2022.
• The payroll tax deferral repayment period is extended through December 31, 2020. The President issued an executive order in 2020 that allowed employers to defer the employee side of payroll taxes for the last months of 2020. Employers who took advantage of this deferral now have until December 31, 2021 to repay these taxes.
• There are many additional or expanded targeted loan or grant programs, including $20 billion for targeted grants through the Economic Injury Disaster Loans Program for businesses in low income communities; $15 billion in dedicated funding for grants to live venues, independent movie theatres, and cultural institutions; dedicated set-asides for very small businesses and lending through community-based lenders like Community Development Financial Institutions and Minority Depository Institutions: and expanded PPP eligibility for 501(c)(6) nonprofits, including and local newspapers, TV and radio broadcasters.
• The new law provides $120 billion to extend enhanced unemployment benefits for jobless workers, who will receive a $300-a-week unemployment subsidy available through March 14, 2021. It also extends the maximum number of weeks an individual may claim benefits through regular state unemployment and enhanced unemployment benefits to 50 weeks.
• The current CDC residential eviction moratorium is extended through January 31, 2021. The new law also provides $25 billion of assistance to tenants in arrears on their rent. This assistance can be utilized for past due rent, future rent payments, and utility bills.

Sacks Tierney has qualified attorneys to answer your questions about these provisions and to help guide your business if you wish to apply for and obtain any of the assistance available through the bill’s provisions above.

.fusion-body .fusion-builder-column-13{width:100% !important;margin-top : 0px;margin-bottom : 0px;}.fusion-builder-column-13 > .fusion-column-wrapper {padding-top : 0px !important;padding-right : 0px !important;margin-right : 1.92%;padding-bottom : 0px !important;padding-left : 0px !important;margin-left : 1.92%;}@media only screen and (max-width:980px) {.fusion-body .fusion-builder-column-13{width:100% !important;}.fusion-builder-column-13 > .fusion-column-wrapper {margin-right : 1.92%;margin-left : 1.92%;}}@media only screen and (max-width:640px) {.fusion-body .fusion-builder-column-13{width:100% !important;}.fusion-builder-column-13 > .fusion-column-wrapper {margin-right : 1.92%;margin-left : 1.92%;}}@media only screen and (max-width:980px) {.fusion-title.fusion-title-5{margin-top:15px!important;margin-bottom:0px!important;}}@media only screen and (max-width:640px) {.fusion-title.fusion-title-5{margin-top:10px!important;margin-bottom:10px!important;}}MUSINGS BY DIANE:How will we all be harmed if small businesses disappear?  To answer that question – think back to your favorite experiences – shopping, meeting friends for coffee, meandering through unique boutiques or gathering to watch holiday celebrations.  None of these experiences include large chain stores, instead they are centered around small businesses.  We all want to be seen as a person, not just someone standing in long line to buy milk.  Now ask yourself how you want the world to look for your children, grandchildren, or all future generations. 
Now I think you are prepared to answer the question – “how will we be harmed if small businesses disappear”. 
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