Consumer Protections in Response to Covid-19
(updated April 10, 2020)
The CARES Act signed was signed into law on March 27, 2020. This Guide is intended to list the many consumer protections available during this crisis. These protections include suspensions on foreclosures, evictions, elimination of interest and forbearance on student loan payments, limits on debt collection, and more.
This Guide will be updated as developments warrant. Because of the rapidly changing reactions to the current epidemic, this list cannot be made complete. Readers are encouraged to email stephen@voklaw.com if you know of additional protections, and/or, for a copy of the most recent Guide.
Contents
I. Small Business Protections
1. Economic Injury Disaster Loans and Loan Advance (EIDL Loan) & Emergency Economic Injury Grant
2. Payroll/Paycheck Protection Program (PPP Loan)
3. Non-disaster SBA 7(a)
4. Facebook
5. Google
6. Taxes
II. Foreclosures and Mortgage Payments for Federally-Backed Mortgages
1. 60 Day Stay on Collection Activities (applies to everyone)
2. Forbearance to Those Affected (directly or indirectly) by Covid-19 (180 days + 180 days)
3. Forbearance Rights for owners of multi-family properties.
III. Loan Modification
IV. Evictions
V. Stimulus Checks
VI. Unemployment
VII. Fair Credit Reporting
VIII. Bankruptcy
1. Chapter 13 Plans Confirmed Before March 27, 2020 (CARES Act § 1113(b)(1)(C))
2. Chapter 13 Plans NOT Confirmed by March 27, 2020 (Excluded from CARES Act)
3. Other CARES Act Bankruptcy onsiderations
4. Tax Refunds
IX. Student Loans
I. Small Business Protections
Loans/Programs are limited to one per Taxpayer Identification Number
1. Economic Injury Disaster Loans and Loan Advance (EIDL Loan) & Emergency Economic Injury Grant
a. What
I. Apply for an EIDL and then request an advance. The advance does not need to be repaid.
II. Up to $10,000 advance will be deposited in your account within three days of applying for an EIDL.
III. Can be used for financial obligations and operating expenses that could have been met had the disaster not occurred.
b. Who is the lender?
I. The SBA
c. Who can apply?
I. (1) a Business with not more than 500 EEs, (2) an individual who operates under a sole proprietorship, with or without employees, or as an IC, (3)… n/a
d. Loan Size
I. $2mm. You may request an advance of up to $10k from the SBA. The advance will be distributed within 3 days. Not required to repay the advance.
e. Forgiveness
I. Loan not subject to forgiveness. The advance of up to $10k is forgiven. The emergency EIDL grant award of up to $10k would be subtracted from the amount forgiven in the payroll protection plan. We’ll find out if there are restrictions about what you can use the $10k for in order for it to be forgiven. Likely the same restrictions as PPP.
f. Terms
I. 3.75%
II. P&I deferment for up to 30 years
III. First payment due one year after the loan origination date (interest accrues during deferment).
g. When
I. Now
h. Collateral
I. UCC lien against business assets.
i. Personal Guarantee
I. Yes, required.
j. What happens if I apply for Both the EIDL and PPP
I. You can apply for the EIDL loan, get $10k, apply for the PPP loan, decide which one you want (if you qualify for both) and keep the $10k under all circumstances.
II. You may not use both loans for the same purpose.
III. You can refinance an existing EIDL int a PPP loan by adding the amount of an EDIL to the sum of the payroll costs.
IV. Any advance received under the EIDL Grant would be subtracted from the amount forgiven of the PPP loan.
k. How
I. Apply here
2. Payroll/Paycheck Protection Program (PPP Loan)
a. What
I. If you’re a company with 500 or fewer employees the government will provide you with a loan equivalent to 8 weeks of your prior average payroll (or, for the self-employed, earnings), plus an additional 25 percent of that sum (unless that grand total adds up to more than $10mm, which is the cap for any individual firm.
b. Why
I. Designed for small businesses to keep their workers on payroll.
c. Who is the lender
I. A bank that is already an SBA lender or any federally insured depository institution/credit union.
d. Who can apply
I. (1) Business entities that were in operation on February 15, 2010, (2) Small business, (3) Individuals who operate a sole proprietorship or as an IC, and (4) Eligible self-employed individuals.
e. Loan Size
I. The calculation is 2.5x average monthly payroll costs of the 12 months prior. Payroll includes compensation (Salary, wage, commission, or similar comp + insurance premiums + retirement benefits + state/local tax paid on employee comp)
I. Compensation to Independent Contractors will not be included in your payroll calculation.premiums + retirement benefits + state/local tax paid on employee comp)
II. Max loan is $10mm.
f. Forgiveness
I. SBA will forgive loans if all employees are kept on payroll for 8 weeks and money is used for payroll, rent, mortgage interest, or utilities.
II. Businesses must spend 75% of loans on payroll in order to qualify for forgiveness (and firms who have already done layoffs can get forgiveness by quickly rehiring).
I. Send proof to lender. They will decide within 60 days.
III. You must apply through your lender for forgiveness on your loan. Must include documentation verifying the # of employees on payroll and pay rates, IRS payroll tax filings, UI filings, payments on mortgage/lease/utilities. You do this after the fact.
IV. Forgiven amounts are excluded from gross income for federal tax purposes.
g. Terms
I. 1%
II. Payments are deferred for 6 months
III. The loan is due in 2 years. No prepayment penalties.
IV. You cannot use your PPP loan for the same purpose as your other SBA loan(s). If you accept the EIDL loan, and you subsequently qualify for the PPP loan, you can re-finance the EIDL loan with the PPP loan.
h. When
I. April 3, 2020 it will start for small businesses and sole proprietorships.
II. April 10, 2020 for ICs and self-employed individuals.
III. Program open until June 20, 2020, or until funds are exhausted.
i. How
I. Apply by June 30, 2020, by completing this application
II. Send to a participating lender.
III. Must submit payroll or bank records.
j. Collateral
I. No collateral required.
k. Personal guarantee
I. Not required.
l. Additional info
I. PPP Fact Sheet
II. Interim Final Rule
m. Restrictions
I. Loan proceeds may not be used to pay:
I. Wages exceeding $100,000 per employee
II. Federal employment taxes
III. Employees who live outside the U.S.
IV. FFCRA paid sick of family leave wages for which credit is allowed.
II. Employers that participate in the PPP are not permitted to defer employer Social Security taxes under Section 2302 of the CARES Act.
III. Employers that receive the Employee Retention Credit for Closures Due to COVID-19 are not eligible for the PPP.
n. Example
I. Annual Payroll: $120,000
II. Average monthly Payroll: $10,000
III. Multiply by 2.5 = $25,000
IV. Maximum loan amount is $25,000
3. Non-disaster SBA 7(a)
a. SBA will pay the principal, interest, and fees for 6 months for these loans. For current loans, they will do this for 6 months. For new loans, they will do this for loans issued prior to September 27, 2020.
I. Applies to 504 and microloans as well.
b. More info
4. Facebook
a. $100 million grant program for small businesses experiencing hardships. 30k business will get grants and part of grants will be “ad credits.”
b. Will roll out soon.
5. Google
a. $800 million in grants for businesses affected. Ad credits.
b. Will roll out soon.
7. Taxes
a. You can defer the 6.2% of SS tax that employer usually pays for each employee. Half will be due by Dec 31, 2021, and half due end of 2022.
II. Foreclosures and Mortgage Payments for Federally-Backed Mortgages
1. 60 Day Stay on Collection Activities (applies to everyone)
a. Federally backed mortgage (Fannie, Freddie, FHA, VA, USDA) may not initiate any judicial or non-judicial process, move for a foreclosure judgment, order a sale, or execute a foreclose related eviction or foreclosure sale.
I. At least 60 days starting March 18, 2020.
II. All borrowers
III. 1-4 unit family property
2. Forbearance to Those Affected (directly or indirectly) by Covid-19 (180 days + 180 days)
a. Federally backed mortgage (Fannie, Freddie, FHA, VA, USDA) may not initiate any judicial or non-judicial process, move for a foreclosure judgment, order a sale, or execute a foreclose related eviction or foreclosure sale.
I. Ends Dec 31, 2020.
II. Silent as to what happens to the missed mortgage payments (i.e. whether they’ll all be due at the end of the forbearance period, looks like the answer is yes.)
III. No docs required to prove that you’ve been affected. Borrower’s attestation to a financial hardship caused by Covid-19 is sufficient.
3. Forbearance Rights for owners of multi-family properties.
a. See CARES Act § 4023.
III. Loan Modification
1. Financial institutions are encouraged to work prudently with borrowers. No specific programs yet. There are some incentives in place for lenders to be proactive with affected borrowers.
IV. Evictions
1. 120 Day Stay on Eviction (Federal)
a. Lessor of a building secured by a federally backed mortgage loan (or participates in certain federal housing programs) may not file a court action for eviction or charge additional fees for nonpayment
b. After 120 day period, lessor must use 30 day notice to quit form to initiate eviction.
2. Moratorium on Evictions through May 31, 2020 (California N-37-20)
V. Stimulus Checks
1. Single Adults:
a. $75,000 or less income will get a $1200 stimulus check
I. Payment is reduced by $5 for every $100 in income above $75,000. Full income phaseout is $99,000.
2. Married Couples:
a. $150,000 or less income will get a $2,400 stimulus check.
I. The payment is reduced by $5 for every $100, making the full payment phased out at $1908,000.
3. Head of Household adults:
a. Single adults with children or other dependents) will receive the full $1,200 payment if they earn less than $112,500. Reduced amounts will go out to Head of Household adults who earn up to $136,500.
4. Children
a. For every qualifying child under age 17, families will receive an additional $500. Retirees and people on disability are also eligible to receive a payment.
5. Income Verification
a. Based on 2019 tax returns, but if haven’t filed, 2018.
I. Seniors who did not file a tax return in 2018 or 2019 will automatically receive the payment based on 1099-SSA and RRB-1099.
b. Based on line 8b of your 1040.
6. The payment is technically an advance on a tax credit that is available for 2020 year. So if you earn less in 2020 then you can take the same credit.
7. You don’t need to apply to receive the payment. IRS uses your returns on file. It will transfer money to you via direct deposit based on the bank account info that you’ve provided.
8. You don’t have to pay income taxes on it.
VI. Unemployment
1. Federal Pandemic Unemployment Compensation
a. This will cover self-employed workers, part-time workers, and those with limited work histories. Under PUA workers are eligible for an additional $600 and an additional 13 weeks of extended benefits.
I. State administered but federally funded.
II. Effective through Dec 31, 2020.
III. Extra $600 per week on top of the state benefit. So for example if worker was making $1100/week. They’d be eligible to receive $450 from the state and an additional $600 of FPUC
b. Self-employed people are newly eligible for unemployment benefits. Based on a formula from the disaster unemployment assistance program and they will also be eligible for the additional $600/week benefit from the fed.
2. Total eligibility for both California and Federal is 26 weeks plus 13. Total of 39.
VI. Fair Credit Reporting
1. No Negative Reporting
a. For creditors who make an accommodation (such as forbearance or workout) shall report the account with the same stats as prior to the accommodation. So, for example, if you were current, then they must continue to report you as being current while on a forbearance program or workout.
b. Effective January 31, 2020 through and until 120 days after the end of the state of emergency.
VII. Bankruptcy
1. Chapter 13 Plans Confirmed Before March 27, 2020 (CARES Act § 1113(b)(1)(C))
a. CARES Act allows motion to modify to extend confirmed plans up to another 2 years for a total of 7 years. To qualify:
I. Loss of income or employment (reduction in income) must be hardship related to Covid-19;
II. The Chapter 13 plan must have been confirmed as of March 27, 2020; and
III. Must file motion by March 26, 2021.
b. For Chapter 13 Trustee Kathy Dockery cases in the Central District – Los Angeles ONLY:
I. Order may be obtained in a matter of days.
II. An expedited, 3-month plan payment suspension/extension due to Covid-19 available. ONLY 3 MONTHS. Informally styled “COMODs.”
III. Motion does not need to be filed/served, but documents evidencing income loss/reduction to trustee and stipulation with trustee.
2. Chapter 13 Plans NOT Confirmed by March 27, 2020 (Excluded from CARES Act)
a. Differing procedures by trustee. Trustee Dockery has indicated:
I. They are amenable with filing a currently-feasible plan with later balloon payment in 60th month.
II. Dockery indicates that even if debtor cannot make last balloon payment, would be open to making last payment in a “reasonable time” per In re Klass 858 F.3d 820 (3rd Cir. 2017).
III. Unclear how other trustees would address this situation presently. Probably makes sense to file a step-up plan with initial payments based on depressed Covid-19 affected income with an anticipated “return to normal” date to step up plan payments when income returns to normal levels.
3. Other CARES Act Bankruptcy Considerations
a. Benefits from government arising from Covid-19 (for example, the $1200 check) EXCLUDED from the definition of income (Sections 1113(b)(1)(A),(B)). No need to pay in plan.
b. No special exemption for these benefits. However, in most cases they will be spent soon upon receipt and likely will not been to be exempted (Could wildcard in CA).
c. Unclear what effect will be in Districts requiring “conduit plans” that include post-petition mortgage payments in plan. Any modification that sets trustee behind on paying mortgage problematic. Tandem applications for plan modification and Covid-19 related mortgage relief?
4. Tax Refunds
a. Los Angeles Bankruptcy Courts
I. Dockery: Allows refund turnover to be suspended for cause.
II. Curry: May stipulate to debtor retaining refunds as necessary.
b. SFV: Case specific
c. Santa Ana: Deadline to turnover refunds extended.
