Dubiln Packard

CARES Act

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Coronavirus government relief package doesn’t work for restaurants

Chefs and restaurant owners believe the coronavirus government relief package doesn’t work for restaurants. Restaurants have been the hardest hit by the coronavirus pandemic.

Celebrity chef and food advocate Tom Colicchio, owner of the restaurant and hospitality group Crafted Hospitality, was one of many restaurateurs who made the difficult decision to close his kitchens and lay off over 400 of employees due to the novel coronavirus, COVID-19.

Now, he’s helping to lead the charge to provide desperately needed aid through the Independent Restaurant Coalition to food service workers, small business owners and their communities.

“We started it about three or four weeks ago when we realized the enormity of the problem that we were facing and we knew there was a stimulus package that was going to help small businesses,” Colicchio said on ABC News’ “Pandemic: What You Need to Know.”

“We found groups in Chicago that were working on the same issue. We found groups throughout the South and we put all these coalitions together and very quickly we hired a lobbying team, a [communications] team, and we are having direct conversations with members of Congress to let them know the issues that we have in the restaurant industry,” Colicchio said. “And also — to let [Congress] know that the — CARES Act — doesn’t really work for the restaurant industry right now.”

He said he’s also trying to get the message to Congress that the Coronavirus Aid, Relief, and Economic Security Act (CARES) Act “doesn’t really work for the restaurant industry right now.”

The CARES Act provides the single largest economic relief package in U.S. history, and will include direct payments for qualifying individuals as well as loans and loan forgiveness for small businesses.

I couldn’t agree more with Chef Colicchio. Loans through the SBA are designed to keep people on the pay-roll temporarily but if your restaurant is closed, why not just let the employee file for unemployment. The SBA loans are promised to be forgiven but only if at least 80% of the funds are used to pay employees. What about rent, insurance, and so many other monthly expenses over and above wages?

Many restaurants are closed now and may never re-open. Others may re-open but look very different from how they looked in January. The restaurant business model is in need of a big change and this might just be the time to make that change.

For more information and links to other articles – go to our Restaurant COVID Relief page

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How to Get a Mortgage Forbearance in Chapter 13 Bankruptcy

Updated information on how to get a mortgage forbearance in Chapter 13 bankruptcy if you are suffering financial hardship due to COVID-19

By now you have heard about mortgage lenders offering a forbearance if you are having a financial hardship due to COVID-19 related loss or reduction of income. But, what can you do if you need a mortgage forbearance in chapter 13 bankruptcy?

Maybe you already tried calling your mortgage lender and haven’t had any luck. At first, there was a severe lack of information on whether or not a person in active bankruptcy could take advantage of this relief. This week, services and lenders clarified their position on getting a forbearance even if you are in active chapter 13 bankruptcy.

This relief is only for mortgage loans that are backed by the Federal Government Fannie Mae or Freddie Mac. This covers about 90% of home loans in existence today. However, there are some loans that are not backed by the Federal Government.

What If My Loan is Not Backed By Fannie or Freddie?

Many lenders are honoring this relief program even if your loan is not backed by Fannie or Freddie so try anyway.

How to Find Out if Your Loan is Backed by the Federal Government.

Go to Fannie Mae’s website or Freddie Mac’s website to look up your loan.

What Is Forbearance?

The first question most people have is: what is a forbearance. A forbearance is a temporary suspension of the requirement to make monthly mortgage payments. Under the CARES Act passed last week, a 180-day forbearance is available if you are having a financial hardship due to COVID-19 related loss of income. And, that 180-day forbearance can be extended one time for another 180 days if your financial hardship continues so long as you apply for the extension prior to the end of the first 180 days.

Mortgage loan servicers have set up applications on their websites to apply for the forbearance. The process is simple and streamlined without the need for documentation.

How to apply for the forbearance.

  • Don’t call your servicer. Call volumes are high and hold times are unbearably long.
  • Go to the website of your loan servicer. Servicers have set up applications on their websites streamlining the process.
  • In your application, state that you are having a financial hardship due to COVID-19 related loss of or reduction of income.
  • No documentation is required to apply for a forbearance (but documentation is required to determine the re-payment agreement).
  • Your servicer may ask you for an authorization from your bankruptcy attorney to allow them to speak directly with you which is normal but most are waiving that requirement temporarily. If you need an authorization, contact me and we will send you one.

How Do I Pay Back The Missed Payments?

During the 180-day period, lenders are required to reach an agreement with you on how to pay back the suspended mortgage payments.

How Do I Reach An Agreement To Repay the Suspended Payments?

Servicers are required to enter into a re-payment agreement with you prior to the end of the forbearance period (which may be extended for another 180 days if your financial hardship persists). Your servicer will contact you with a re-payment agreement.

Typical re-payment agreements might look something like:

  • Defer the missed payments to the end of the loan in either a balloon payment or by adding months to the loan term.
  • Enter into a loan modification agreement.
  • Payback the missed payments over some number of months by adding additional monies to your regular payment.
  • Add the suspended amount to a chapter 13 plan by formatting amending the chapter 13 plan.

Do I have to do anything formal with the Bankruptcy Court?

No, your servicer will file a notice with the Bankruptcy Court notifying the court of the suspended payments. When the re-payment agreement is executed, your servicer will again notify the Bankruptcy Court of the re-payment terms.

What Do I Do If I Can’t Make My Chapter 13 Plan Payments to the Bankruptcy Trustee?

Unfortunately, as of right now, there is no simple answer to this question. Typically, when chapter 13 plan payments are missed, a trustee files a motion to dismiss you entire bankruptcy case. This requires a formal written response by your attorney and a court appearance. Usually, missed chapter 13 plan payments are resolved by making a lump sum payment to catch up all or a portion of the missed payments and sometimes a the remaining portion of the missed payments may be added to the remainder of the chapter 13 plan at the trustee’s discretion.

After talking to trustees this past week, the trustees in New Jersey are informally not taking action to dismiss a case if chapter plan payments are missed. However, at some point in the future, any payments that are missed will have to be made up.

What Next?

If you are in need of a Mortgage Forbearance in Chapter 13 Bankruptcy, follow these steps and good luck.

For More Information on any COVID-19 related relief, see our special coronavirus resource page

For more information on relief programs and other important updates about the coronavirus COVOID-19, go to our Coronavirus Resource page.

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CARES Act Small Business Loans – Summary of Emergency Loans

This is a brief summary of the CARES Act Small Business Loans relief program. Here are the very basic points to consider which will help you decide whether or not to pursue relief under this Act.

The Coronavirus Aid, Relief, and Economic Security (CARES)
Act allocated $350 billion to help small businesses keep
workers employed amid the pandemic and economic
downturn. Known as the Paycheck Protection Program,
the initiative provides 100% federally guaranteed loans
to small businesses.

Importantly, CARES Act Small Business Loans may be forgiven if borrowers
maintain their payrolls during the crisis or restore their
payrolls afterward.

Am I Eligible?

You are eligible if you are:

  • A small business with fewer than 500 employees.
  • A small business that otherwise meets the SBA’s size standard.
  • A 501(c)(3) with fewer than 500 employees.
  • An individual who operates as a sole proprietor.
  • An individual who operates as an independent contractor.
  • An individual who is self-employed who regularly carries on any trade or business.
  • A Tribal business concern that meets the SBA size standard
  • A 501(c)(19) Veterans Organization that meets the SBA size standard

What Will Lenders Be Looking For?

In evaluating eligibility for CARES Act Small Business Loans, lenders are directed to consider whether the borrower was in operation before February 15, 2020 and had employees for whom they paid salaries and payroll taxes or paid independent contractors.

Lenders will also ask you for a good faith certification that:

  • The uncertainty of current economic conditions makes the loan request necessary to support ongoing operations
  • The borrower will use the loan proceeds to retain workers and maintain payroll or make mortgage, lease, and utility payments
  • Borrower does not have an application pending for a loan duplicative of the purpose and amounts applied for here
  • From Feb. 15, 2020 to Dec. 31, 2020, the borrower has not received a loan duplicative of the purpose and amounts applied for here (Note: There is an opportunity to fold emergency loans made between Jan. 31, 2020 and the date this loan program becomes available into a new loan)

If you are an independent contractor, sole proprietor, or self-employed individual, lenders will also be looking for certain documents (final requirements will be announced by the government) such as payroll tax filings, Forms 1099-MISC, and income and expenses from the sole proprietorship.

How Much Can I Borrow?

Loans can be up to 2.5 x the borrower’s average monthly payroll costs, not to exceed $10 million.

Will This Loan Be Forgiven?

Borrowers Are Eligible To Have Loans Forgiven

A borrower is eligible for loan forgiveness equal to the amount the borrower spent on the following items during the 8-week period beginning on the date of the origination of the loan:

  • Payroll costs (using the same definition of payroll costs used to determine loan eligibility)
  • Interest on the mortgage obligation incurred in the ordinary course of business
  • Rent on a leasing agreement
  • Payments on utilities (electricity, gas, water, transportation, telephone, or internet)
  • For borrowers with tipped employees, additional wages paid to those employees

The loan forgiveness cannot exceed the principal

This is just a brief summary of the CARES Act Small Business Loans there is more detail available but this is the basic summary of what you need to know before you get started.

Feel free to contact us for more information.

Go to our CoronaVirus Resource page for more information on other programs that are available now and learn about others that are being discussed.

The US Chamber of Commerce has good information on what’s available for small businesses at their website here.