The American Bankruptcy Institute wrote to Congress formally requesting that debtors who have filed bankruptcy cases remain eligible for Paycheck Protection Program loans, notwithstanding their respective bankruptcy filings, in any future amendments or legislation addressing PPP funding.

“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,” Amy Quackenboss, executive director at ABI, wrote 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.”

The full letter can be read here.

PPP loans, created as part of the CARES Act, have served as lifelines to many small businesses that have suffered economic distress as a result of the COVID-19 pandemic and shutdowns. The 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 wrote in the letter. “It is unclear why the SBA determined that persons or entities ‘presently involved in any bankruptcy’ are ineligible for PPP assistance. 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.