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Phone: 805.492.7045
Due to precautions related to COVID-19, we have expanded our options for remote consultations. Please contact our office to discuss whether a full phone consultation or video conference is appropriate for your situation.

PPP loan forgiveness requirements | Are PPP loans dischargeable

Making the most of any situation can help you not only get through, but can also help you get out on the other side in better shape.

When it comes to living through a pandemic as we currently are, money can get tight and it can be difficult for many to pay off loans, take care of monthly payments, and just survive honestly. 

PPP loans, or paycheck protection program loans can help you make it through, but what about in cases of bankruptcy and what are the requirements of PPP loan forgiveness?

PPP Loans During Bankruptcy

  • A PPP loan is designed to help small businesses in times of crisis, the pandemic we are living through is a perfect example and PPP loan forgiveness requirements.
  • This type of loan is meant to provide the employer with funds to keep employees working and to keep them on the payroll.
  • These loans are also frequently referred to as paycheck protection program loans or PPP loan and they are crucial for small businesses that are facing hardship and that may not be able to be open to create funds necessary to pay their employees.
  • PPP loans are distributed by the Small Business Association and they can be forgiven in full if the borrower meets the criteria for keeping their employees employed and paid.
  • If you are unable to keep your employees and have to close the business, you will have to pay the loan in full and will have to pay the loan back even though you may not be working and may have no income.
  • In times of extra strife or when the business owner has to close the establishment and therefore cannot satisfy the employment requirements to have the loan forgiven through the Small Business Administration, the loan can often be discharged during bankruptcy.
PPP loan forgiveness requirements
- PPP loans

Is My PPP Loan Dischargeable During Bankruptcy?

  • The short answer is yes. Dischargeable in terms of bankruptcy means that the debtor or the person that took out the loan is no longer required to pay the remainder of the balance because it was dismissed during bankruptcy proceedings.
  • This also means that the person that is filing can essentially cut ties with that lender and that they have no legal responsibility to pay the loan off.
  • This type of loan is dischargeable (PPP loans) because it does not fall into a specific category. There are some loan and debt types that cannot be dismissed in bankruptcy filings.
  • They are as follows: loans that are not listed in the proceedings, taxes, child support payments or alimony, fines that you owe to the government either local or federal, personal injury debts that are your fault, student loans, attorney fees, and criminal restitution.
  • Your lawyer in your bankruptcy proceedings can better illustrate what loan types are not forgiven and can help you to determine what loans you can apply to your bankruptcy and what loans you have to reaffirm and then pay later.

Loan Forgiveness Requirements of PPP Loans

Loan Forgiveness Terms of PPP Loans -- Bullets Points
PPP loan forgiveness requirements
  • Some PPP loans can be forgiven if the borrower meets specific requirements associated with the loan.
  • The first is if the loan was used for authorized or approved expenses like paying the payroll of employees to retain them, using the PPP loan to pay for business related expenses, or making sure that the loan was used to help keep your business afloat.
  • If you meet these PPP loan forgiveness requirements and have documentation to support the fact that the funds were used for appropriate expenses, you can apply to have the loan forgiven and in many cases, you can have the portion that was used to pay your employees or to pay business expenses forgiven.
  • If this is not the entire loan balance, you can then fill out your bankruptcy to have the remaining portion of the loan discharged in bankruptcy.

What Collateral is Required For Your Loan Approval?

  • A PPP loan does not require any collateral for the borrower to be approved but this does not mean that the Small Business Association cannot come back against you for secured debt.
  • An EIDL loan does require some collateral to be approved.
  • With an EIDL loan you need to provide collateral for loans that are above $25,000.
  • In most cases collateral is thing like the equipment that you use in the business to keep it running.
  • With a PPP loan you are not going to have to put up any collateral but you are going to be a bit more limited in the amount of money that you can get to care for your business and to pay off your debts.
  • It is always important that when you do have a loan of any sort that you are looking to discharge in bankruptcy, that you take the time to find a great lawyer or law firm that can help you to navigate the bankruptcy process.

Here, we have understand about PPP loans forgiveness requirements in California & With the help Berneman law firm you can get through your bankruptcy and come out on the other side better for the experience.

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