A blog about debt, credit and bankruptcy

June 15, 2020 By Jen Lee Leave a Comment

I Didn’t Know You Help With That!

I always say that one of the most frequent sayings I hear is, “I didn’t know…” and it happened again on Friday.

I was reminded this week that people may not realize how we help individuals and business owners with debt and credit strategy (or maybe what that means). A networking partner reached out to me to ask when I would get involved with a business that has not been able to operate due to COVID-19 and had some debt they were worried about how to pay.

Here was my response:

Thanks for your email! I’ve been doing a lot of strategy sessions to look at various options for businesses. We generally are looking at potential personal liability on the debts, what happens if revenue doesn’t come in, and the possibility of settling debts when needed. Also, if there’s a personal guarantee on the lease, that’s something that would need to be planned around.

The session on my website is offered as a COVID-19 Financial Stress Strategy Session (link in my signature).

The networking partner responded that she had no idea that I did these 1-hour sessions and that is a very valuable resource for those needing advice.

This really gets to the heart of getting advice at the time it is needed instead of waiting until it’s too late or trying to book free consultations with various attorneys to piece together advice. Many of our clients do not need expensive legal solutions or a bankruptcy. They just need to make sure they are on the right track and not making more mistakes that will lead to expensive legal solutions or bankruptcy in the future. That’s what our strategy sessions offer. Clients leave with a plan, an outline of options, and a discussion of pros/cons of those options.

So, yes, I help with that!

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.

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!

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 2 Comments

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.

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