Commentary: New Bankruptcy Relief Provisions, Brought to You by the 2021 Federal Appropriations Act

Commentary: New Bankruptcy Relief Provisions, Brought to You by the 2021 Federal Appropriations Act

ABI Bankruptcy Brief

January 7, 2021

ABI Bankruptcy Brief

Commentary: New Bankruptcy Relief Provisions, Brought to You by the 2021 Federal Appropriations Act

by Irve J. Goldman
Pullman & Comley, LLC; Bridgeport, Conn.

The new Consolidated Appropriations Act of 2021 (the “Act”), which was signed into law on Dec. 27, 2020 (H.R. 133), includes within its 5,593 pages a number of new bankruptcy relief provisions for businesses as part of what the legislation calls the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act. Additional bankruptcy relief provisions are found in a miscellaneous section of the Act. A summary of the relief provisions (including PPP loans becoming available to certain debtors, treatment of commercial real estate leases and preference amendments), which will predominantly affect small businesses, is available here.

Treasury Launches $25 Billion Coronavirus Rental Assistance Program

The Treasury Department announced today that it has launched a $25 billion rental assistance program with funds from the $900 billion coronavirus relief package enacted last week, The Hill reported. State, territorial, tribal and local governments covering more than 200,000 people are now eligible to apply for aid allocated to help struggling Americans cover rent and prevent landlords from racking up debt on tenants. Eligible entities can apply for funding to cover up to 15 months of rental expenses for households, the Treasury Department said. Qualifying households include at least one person who is eligible for unemployment insurance or suffered a coronavirus-related loss of income; is at risk of homelessness or housing insecurity; and has a household income at or below 80 percent of “the area median.”

Weekly Jobless Claims Dip Slightly to 787,000

The Labor Department released data today showing that new weekly claims for unemployment insurance totaled 787,000 in the final week of 2020, moving little from the previous week but remaining well above the pre-pandemic record high, The Hill reported. In the week ending Jan. 2, weekly jobless claims dropped by 3,000 from the previous week’s revised total of 790,000, which was initially reported at 787,000 claims. Another 161,000 people applied for Pandemic Unemployment Assistance, a program created to extend jobless benefits to gig workers, contractors and others who don’t qualify for traditional unemployment insurance. The new batch of jobless claims is yet another warning that the initial recovery from the coronavirus recession has continued to slow under the weight of record-breaking COVID-19 deaths and months of squabbling over further economic relief. Weekly jobless claims since the end of last March have remained well above the 690,000 pre-coronavirus claims record set in 1982. President Trump signed a bipartisan $900 billion coronavirus response and stimulus bill in the middle of last week that included extensions of expanded unemployment insurance programs, a second batch of direct relief payments and another round of Paycheck Protection Program loans for small businesses.

Labor Department Estimates $36 Billion in Improper Unemployment Payments Made Under CARES Act

The Department of Labor's Office of the Inspector General estimates that at least $36 billion worth of unemployment payments expended as of Nov. 7 may have been invalid, reported. The government allocated $360 billion in total unemployment funding in the $2.2 trillion Coronavirus Aid, Relief and Economic Security (CARES) Act, which passed in March. The OIG, which has long been critical of the DOL's unemployment insurance program, said that if improper payments continue at 10%, at least $36 billion out of $360 billion expended under the $2.2 trillion CARES Act could be improperly paid, "with a significant portion attributable to fraud" — and that's a conservative estimate. The OIG added that the Labor Department "has not done enough to formally assess the various strategies available to combat improper payments and determine which issues persist, due in part to a lack of reliable state-reported data." Identity thieves and organized criminal groups continue to find holes in the unemployment insurance program and have exploited those weaknesses, the OIG found.

Cash-Strapped Americans Are Drawing Down Savings as Pandemic Divisions Widen

One in four consumers pulled money from their savings in December, the most so far in the pandemic, according to a new survey from financial comparison website MagnifyMoney, Bloomberg News reported. While men, college graduates and six-figure earners continued to add money to their savings, overall the proportion of those able to save anything dropped to 33 percent compared with 42 percent at the same time last year. U.S. Census data shows 87.6% of adults in households with incomes of $25,000 or less planned to use the previous round of stimulus checks — $1,200 per person — to simply meet expenses. By contrast over a third of adults in households with incomes above $75,000 reported that they would use the money to pay off debt or add to it to their savings. Some of the savings drawn down in December may have been used to cover holiday spending, according to Matt Schulz, chief credit analyst at LendingTree, which owns MagnifyMoney. The survey of 1,023 American consumers was conducted online by customer research firm Qualtrics Dec. 9 to 11.

Don't Miss the "Diversity in Insolvency: Putting Inclusive Ideas into Practice" abiLIVE Webinar on Jan. 21

Build a better law practice while building a more diverse and inclusive workplace! Sponsored by ABI's Diversity and Inclusion Working Group, the "Diversity in Insolvency: Putting Inclusive Ideas into Practice" webinar will feature Diversity and Inclusion (D&I) leaders from the public and private sectors, who will discuss the effects of diversity, equity and inclusion on career trajectory, mentorship and the bottom line, while providing tips and best practices for retaining and attracting talent. The session will begin with a plenary session, followed by breakout rooms staffed with a D&I expert and a bankruptcy judge. The program will conclude with an optional happy hour. Click here to register for FREE.

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New on ABI’s Bankruptcy Blog Exchange: More Incentives for Smaller Lenders in Next PPP Round

Community banks will have access to allocated funds and at least two days of exclusive portal access when the Small Business Administration relaunches the Paycheck Protection Program, according to a recent blog post.

To read more on this blog and all others on the ABI Blog Exchange, please click here.

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