2nd Circ. Says Gov't Can Deny COVID Loans To The Bankrupt

By Rick Archer (March 16, 2022, 7:47 PM EDT) -- The Second Circuit on Thursday overturned a bankruptcy court's finding that the U.S. Small Business Administration could not deny a Paycheck Protection Act loan to a bankrupt Vermont hospital, saying a loan that may not have to be repaid is still a loan.

In its opinion, the panel found that the Vermont bankruptcy judge had erred in finding that PPP payments were grants protected by rules forbidding bankruptcy discrimination, saying the fact that the government could waive repayment doesn't turn a loan into a grant.

"A forgiveness option, favorable as it is, cannot alter the structure of what a loan forgiveness...

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