First Page
247
Abstract
The 2019 Coronavirus Pandemic (COVID-19) led to widespread government-mandated lockdowns, causing numerous businesses to close their doors permanently. To assist financially distressed businesses and individuals during the pandemic, Congress passed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). The Small Business Administration (SBA)—the agency tasked with implementing the CARES Act—distributed funds to individuals and businesses through the Paycheck Protection Program (PPP). Part of the SBA’s eligibility requirements to receive funding through the PPP included an exclusion provision that barred debtors presently involved in any bankruptcy proceeding from receiving any PPP funding. Many debtors in bankruptcy filed suits in federal bankruptcy courts across the United States to enjoin the SBA from excluding applicants solely based on their bankruptcy status. Courts, such as the Second Circuit and the United States Bankruptcy Court for the District of Maine, were split on whether the SBA violated Section 525(a) of the Bankruptcy Code or was within its right to deny PPP funding to debtors in bankruptcy. This Note explores the SBA’s rationale for excluding debtors in bankruptcy from PPP funding solely based on their bankruptcy status. This Note further analyzes the split court decisions regarding whether the PPP functioned more as a typical loan program or more as a grant. This Note then argues that the SBA’s decision to exclude debtors in bankruptcy from receiving PPP funding violated the anti-discrimination provision of the Bankruptcy Code. This Note further asserts that the courts siding in favor of the SBA incorrectly classified the PPP as a typical loan program. Lastly, this Note proposes solutions for the United States government to adopt more inclusive measures for business owners of all backgrounds and financial statuses in a future crisis like the COVID-19 pandemic.
Recommended Citation
David Y. Kamins,
Punishing Debtors in Bankruptcy During COVID-19,
18 Brook. J. Corp. Fin. & Com. L.
247
(2023).
Available at:
https://brooklynworks.brooklaw.edu/bjcfcl/vol18/iss1/13