A blog about debt, credit and bankruptcy

April 21, 2020 By jenleelaw Leave a Comment

Round 2 of PPP: Tips to Make or Break Your Approval Odds

The CARES Act, passed on March 27, 2020, kicked off a chaotic and unorganized process of applying for a new program called the Paycheck Protection Program. On the surface, this looked like a great program for struggling businesses. A loan that can be forgiven if used to pay employees, rent, and other approved business expenses. This idea was far better than saddling small businesses with more debt than they already have.

The initial problem was that lawmakers passed a bill that had absolutely no procedures or processes in place. Banks scrambled to obtain guidance with bankers working around the clock to get an approved SBA application…and then the application changed just hours before the launch of the program. Then, the money ran out two weeks into the program. As we gear up for round 2 of funding, here’s what you need to do immediately to obtain funds:

Get a copy of the application (https://www.sba.gov/sites/default/files/2020-04/PPP%20Borrower%20Application%20Form.pdf) now.
Fill it out completely. Do not leave a single field blank. If you do not know the answer or how to calculate your monthly payroll, call your accountant, your payroll specialist, or a professional who can explain it to you. The funds for this program are going to people who can follow instructions.
There are specific documents required to move your application along to the next stage. They generally include your 2019 940 and 941 tax documents, bank statements to show proof of payroll, payroll reports to verify monthly payroll costs, and benefit invoices/statements. Your application does not move at all if you do not provide every single document that is requested.
If your bank requests something specific to complete your application, stop what you are doing and immediately find that document and submit it electronically and in a readable format. Do not wait until tomorrow or next week. Your application will be pushed to the side.
Finally, not specific to PPP, but it became apparent that the majority of really small businesses who got funds in the initial round banked with smaller, local, or private banks. I highly suggest you find a bank where you have a personal relationship with a banker. I always hear from people that they have banked at xxx big bank for years and it’s too hard to switch or things are fine. When things go sideways, you want the bank where you have the cell phone number of your banker and she answers your call every time.

If you are looking to obtain funds under Round 2. Start now. Get your documents together. Respond to requests for documents. Understand how the program works. We wish you the best of luck in the coming weeks!

This is just a basic overview and is not legal advice specific to your situation. If you have questions about your rights when it comes to debt and credit, you should speak with an attorney in your area for legal advice. If you live in California or North Dakota and would like to speak with Jen Lee Law regarding your situation, please schedule an appointment.

March 30, 2020 By Jen Lee Leave a Comment

The CARES Act and the Paycheck Protection Program: What You Need to Know

Lots of information out there about the new CARES Act and what it purports to do. It’s a huge document and has a lot of moving parts. In an attempt to pull out useful information for the average consumer and small business owner, we are working on a series of blog posts to help answer some questions.

One of the most interesting sections discusses a new loan program for small businesses that has an element of forgiveness involved. A chief complaint of SBA loans is that businesses were already saddled with debt and adding more debt may not make sense or even be feasible in the long-term. Enter the Paycheck Protection Program (PPP) loan.

The PPP is different than the disaster recovery loan that many have already tried to apply for in the past week or two. Applications are not available yet and documents, procedures, and communication with banks are still being established. The program offers cash flow assistance to small businesses with fewer than 500 employees.

The amount available is equal to 2.5 times the average monthly payroll costs or $10 million, whichever is less, and the average monthly payroll is based on 2019 payroll figures. Monthly payroll costs not only includes wages for employees, but also paid sick leave, health insurance premiums, payroll taxes, and other benefits. The loans are intended to cover payroll costs, business disruption, health insurance premiums, lease or rent expenses, and utilities.

A very important detail is that the loans will not be personally guaranteed or require collateral, which is very different than most SBA products previously on the market.

Now, the forgiveness part, which we should all be looking at to figure out the terms and conditions. Loans under the PPP may be fully or partially forgiven. Loan proceeds used to make payroll, pay utilities, rent, mortgage, and existing business debt may be forgiven, dollar for dollar. However, in order to receive the dollar for dollar forgiveness, employees need to remain employed and paid through the end of June.

Keeping complete and accurate records will be key to the forgiveness of these loans. You have to be able to show what the funds were used for, that those uses qualify under the program, and that you kept payroll going through the end of June. The better your records, the easier it will be to have the loan reduced on a dollar for dollar basis.

The PPP loans will be offered through local banks, not directly from the SBA. If you need connections to a bank offering these programs, please feel free to email me.

March 28, 2020 By Jen Lee Leave a Comment

The CARES Act and Chapter 13: What You Need to Know

The CARES Act has some specific protections for debtors in Chapter 13. For background, a Chapter 13 bankruptcy is a reorganization plan where you create a plan to pay back some or all of your creditors over a period of three to five years. All of your creditors get a copy of your plan and have the chance to object towards the beginning. Once the judge confirms the plan, you continue making a monthly payment to the Chapter 13 Trustee as outlined in your plan document.

The reason for the background is that the CARES Act allows us to stretch payments up to seven years, instead of the five-year limitation under the bankruptcy code. This is to allow people to be able to catch-up on payments and to keep plans from failing when people cannot make payments during this uncertain period when incomes have significantly dropped. However, in order to take advantage of this new provision, the Chapter 13 Plan has to be a CONFIRMED plan before the date of enactment of the CARES Act. That means that anyone who has recently filed a Chapter 13 case where the plan has not been confirmed yet may still be stuck in limbo with no income, but no way to extend payments.

If your Chapter 13 plan has already been confirmed, the new Act allows for modification and the extension of payments, but no standard procedures have been implemented yet for how those modifications will be done. Under normal circumstances, we file a motion to modify, send out the plan to all creditors for review, and then if there are no objections, the modified plan is approved. Keep in mind that we probably will want to modify after income has stabilized so that we can propose a plan that you can actually keep up with for the rest of the case.

If you are in a Chapter 13 plan now, you should try and make some sort of payment towards your plan each month, even if it’s not a full payment. When we go back to reconcile total payments, that will help in keeping a reasonable monthly payment going forward.

The important part of being in a Chapter 13 case is to communicate with your attorney. The CARES Act passed yesterday, but it’s going to take several months for many to catch-up on payments, especially those who are self-employed or contractors.

March 27, 2020 By Jen Lee Leave a Comment

The CARES Act and Student Loans: What You Need to Know

Student loans are discussed in § 3513 of the bill and there is some relief available, provided your loans are Direct Loans or FFEL loans owned by the U.S. Department of Education. Private loans, Perkins Loans, and FFEL loans not owned by the U.S. Department of Education are not protected by the CARES Act.

If your loan is covered, payments are suspended through September 30, 2020 and no interest accrues during that time. The suspension months also count towards forgiveness programs if you are enrolled in one.

In addition, if you have a wage garnishment or your tax refund is subject to interception for delinquent student loans, those collection efforts are suspended. Credit reporting during this time period is also included in this section and any payment that is suspended is treated as if the regularly scheduled payment had been made by the borrower.

Starting on August 1, 2020, suspended student loan borrowers will receive notices regarding when the normal payment obligations will start again and that the borrower has the option to enroll in income-driven repayment options at that time.

If your loan is not covered under this program, you will want to reach out to your lender or servicer to discuss forbearance options, the terms of a forbearance, and how to apply. Also, it is very important that you find out how the forbearance will be reported on your credit and understand how it may affect your future ability to obtain credit.

February 5, 2020 By Amir Beg Leave a Comment

Are You Having an Affair (With Your Finances )?

In a successful relationship, honest and open communications with a partner are critical foundations for long-term happiness. The same principles also apply when managing personal finances. Disagreements over spending and money management can lead to breakdowns in marital relationships, an increase in mutual distrust, arguments over money, and potentially divorce. In a recent survey from last year, 11% of respondents admitted they would leave their spouse over financial issues if they believed they were bad with money.¹ Another study suggested that couples who argue weekly over finances were 30% more likely to divorce than their counterparts who only argued a few times every month.² The longer it takes for parties to acknowledge and address the problem, the more likely it will escalate into a bigger conflict down the road.

“It’s not you… it’s me.”

Financial infidelity does not carry the same stigma in society as marital infidelity, but it is more prevalent than society cares to acknowledge. A 2018 study of 414 participants indicated that 27% had deceitfully kept a financial secret from their partner.³ The most recent study from insurance marketplace provider Policygenius provides some sobering statistics:

12% of respondents had a credit card they did not disclose to their significant other.

12% of respondents had a secret savings account.

13% respondents had a secret checking account.

12% also had hid a purchase from their partner within the prior 6 months.

19% of respondents only tell their spouses before committing to any purchase.⁴

This brings up an important question: why are people so reluctant to discuss issues concerning their finances?

The “Money Talk”

There is no one single cause for financial infidelity, but to be frank, some people just do not like talking about finances for personal reasons. In households where one partner happens to earn significantly more than the other (e.g. stay-at-home parents), there might be a tendency for the bread winner to think in terms of singularity (“his/her share” of the finances) rather than a joint contribution (“our” money). Problems can ensue when partners stop treating their “better half” as an equal in the relationship.

Some individuals would bristle at the thought of making a budget or tracking expenses talking about money, finding the encounter as pleasant as running fingernails down a chalkboard. A Harris Poll conducted on behalf of the National Endowment for Federal Education found that 36% of respondents believed that some issues regarding their finances should remain private. On the other hand, 26% had discussed money issues with a loved one previously and were certain their spouses would disapprove.⁵

Fear of disappointing a loved one can also play a role in financial infidelity. The Harris Poll indicated that 18% of respondents were embarrassed about their financial outlook and were concerned how their significant other would react; 16% would not discuss matters out of anxiety.⁶ From my perspective, a candid discussion is better than having both parties living in denial of their current situation. Although it may be more comforting to hear a loved one say, “I got the bills under control,” it is better to be truthful than hearing an admission three months later that, “I need to take $800 from our bank account to cover the minimum balance on my Visa this month. Oh, and I need to make the payment in 2 days.”⁷

Let’s also acknowledge that society has played a role in segregating household accounts. Most families rely on two incomes to financially support the household. Compared to prior generations, people are also waiting longer before tying the knot (and managing their financial affairs).⁸ If couples are not discussing financial issues before moving in together, ongoing debt problems can come back to haunt them long after, potentially deferring lifelong goals such as saving for home ownership or retirement.

Taking Control of Your Affairs

Some people may be wondering: is there a right way to manage finances? Is it better to maintain joint accounts or keep separate records? Recommendations may vary, but there is no right or wrong way to take control of your financial affairs. It really is a matter of comfort and personal preference. Couples can (and have) successfully maintained their separate financial records just as well as those who jointly manage their assets. As one group of marital attorneys noted, “The key is for couples to discuss their views on money and to decide among themselves how they will make decisions about how the family money will be controlled…As long as the goals and attitudes toward money are shared, the mechanics of fiscal management are less important.”⁹

New Year, New You

With the start of 2020, there is plenty of time to make positive and healthy changes for your personal and financial health! As part of our one hour strategy session, we work with clients to discuss and develop debt and credit strategies, and fashion remedies to provide relief to their ongoing financial challenges. Feel free to schedule an appointment at one of our convenient locations by clicking the link at the top of the screen.

1 Hanna Horvath, “Couples & Money survey: 1 in 5 people think their partner is financially irresponsible” Policygenius. http://www.policygenius.com/blog/couples-money-survey-2019/
2 Preston Ni, “7 Keys to Long-Term Relationship Success” Psychology Today, https://www.psychologytoday.com/us/blog/communication-success/201210/7-keys-long-term-relationship-success
3 Jeanfreau, M., Noguchi, K., Mong, M. D., & Stadthagen, H. (2018). Financial Infidelity in Couple Relationships. Journal of Financial Therapy, 9 (1) 2. https://doi.org/10.4148/1944-9771.1159
4 PRSNewswire https://www.prnewswire.com/news-releases/policygenius-one-in-five-people-think-their-partner-is-bad-with-money-300927244.html
5 Harris Poll, “Celebrate Relationships, But Beware of Financial Infidelity”. Feb. 14, 2018. https://www.nefe.org/press-room/polls/2018/celebrate-relationships-but-beware-of-financial-infideltiy.aspx
6 Id.
7 As always, communications made to an attorney for the express purpose of seeking legal consultation or advice are held in complete confidentiality under attorney-client privileges.
8 Hanna Horvath, “They may share love, but many couples don’t share money.” Policygenius Sep. 24, 2018 https://www.policygenius.com/blog/couples-mange-money/
9 “Making Marriage Last”: A Guide to Preventing Divorce. American Academy of Matrimonial Lawyers.

Round 2 of PPP: Tips to Make or Break Your Approval Odds

The CARES Act and the Paycheck Protection Program: What You Need to Know

The CARES Act and Chapter 13: What You Need to Know

The CARES Act and Student Loans: What You Need to Know

Are You Having an Affair (With Your Finances )?

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