The COVID-19 pandemic has put the entire country in an economic crisis. For many people, it might be overwhelming for people to map out a proper strategy to stay afloat, even as we begin to emerge from under the burden of the economic crash.
This blog will be updated to outline different strategies on where to turn during this financial crisis, with a focus on the state of New Jersey. Our law firm’s emphasis is on representation of individuals and businesses in bankruptcy. Many of these strategies are designed to help you avoid bankruptcy. If a bankruptcy is needed, our New Jersey lawyers are there to help you navigate the situation. Let’s look at some strategies and helpful options.
Live Updates on COVID-19 Related Strategies
Small Business Loans To Get You Through the Coronavirus Shutdown
The U.S. Small Business Administration (SBA) has made the process for receiving disaster assistance much faster and easier. Now with the new deal in Congress, more money has been made available. The SBA’s Economic Injury Disaster Loans can offer up to $2 million in assistance for a small business, which should provide temporary relief to help mitigate a loss of revenue the businesses have been experiencing due to COVID-19.
The stimulus law that passed on March 6th (the “Coronavirus Preparedness and Response Supplemental Appropriations Act”), extended the SBA’s Economic Injury Disaster Loan Guidelines to include small businesses across the country that have been affected by COVID-19.
Congress also passed the unprecedented Payroll Protection Program (PPP) on April 27th. The PPP is a loan service designed to help small businesses by forgiving loans given to them by the SBA, provided all employees are kept on the payroll for eight weeks and the money is used for utilities, rent, mortgage interest, or payroll. In early June, SBA updated and extended its PPP program, making it even easier for businesses to recover following the damages done by COVID-19. They have added the following conditions, updated from the conditions established upon its inception:
• You now have 24 weeks to spend your funds, up from eight weeks.
• You need to spend 60% of the loan on payroll, down from 75%.
• The covered period of the loan now ends Dec. 31 instead of June 30.
• You won’t have to make employer payroll tax payments through the end of 2020.
• Your business will not lose any loan forgiveness eligibility if you can show that some employees declined to return to their jobs or the pre-pandemic headcount is no longer required.
• The payback period for new loan applicants has been extended from two years to a minimum of five for those not seeking or who are ineligible for forgiveness.
March 27th, 2020 saw Congress passing the Bankruptcy Relief Expanded Under the Coronavirus Aid, Relief, And Economic Security Act (CARES Act), which expanded the protections consumers and small businesses enjoyed under the Bankruptcy Code.
Some key bankruptcy provisions under the Cares Act are as follows:
• Increasing the Small Business Reorganization Act of 2019 (SBRA) limits under the eligibility threshold for businesses filing under new subchapter V of chapter 11 of the U.S. Bankruptcy Code from $2,725,625 of debt to $7,500,000. It has a sunset provision, however, and the eligibility threshold will return to $2,725,625 after one year.
• Amending the definition of “income” in the Bankruptcy Code specifically for debtors under Chapters 7 and 13 so that coronavirus-related payments are not treated as income for purposes of filing bankruptcy.
• The coronavirus-payments do not count toward the calculation of disposable income for purposes of confirming a chapter 13 plan, making it exempt from that calculation.
• Allowing individuals currently in chapter 13 to seek payment plan modifications if they are experiencing a material financial hardship due to the COVID-19 pandemic, including extending their payments for up to seven years after their initial plan payment was due.
The country will be providing temporary relief for federal student loan borrowers by requiring the Secretary of Education to defer student loan payments, principal, and interest for 6 months, through September 30, 2020, without penalty to the borrower for all federally owned loans.
Resources and information that have become available at www.sba.gov/disaster-assistance/coronavirus-covid-19 and www.covid19.nj.gov.
If You Are Self-Employed or Have a Small Business, You Need To Read This: https://www.scura.com/blog/what-the-sba-is-doing-to-help-the-self-employed-and-the-small-business-community
Taxpayers have an unprecedented tax payment extension from the Fed for 90 days, until July 15th. This is up to individuals and small business owners of up to $1 million in taxes owed, and up to $10 million for C-Corporations.
Unemployment Benefits Expanded Due to Coronavirus
Unfortunately, many businesses have laid off, furloughed or reduced the hours of employees. If you lose all or part your paycheck through no fault of your own, you can apply for unemployment benefits. You can on the New Jersey Department of Labor website.
Typically, you are eligible for up to 26 weeks of benefits, so long as you meet certain requirements. However, if your workplace temporarily or permanently closed because of COVID-19, you could be eligible for unemployment benefits without meeting those requirements.
These benefits have expanded since the start of the pandemic. On March 25th, 2020, a deal was reached between Congress and the Trump administration. On the surface, the deal provided direct payments to US citizens of up to $1,200 and expanded unemployment insurance. It also included a $367 billion-dollar program for small businesses in order to help them pay employees who stayed at home due to the COVID-19 pandemic.
Deal with Insurance Coverage
Insurance companies across the country are unfairly denying coverage claims during this pandemic without conducting proper investigations. Because the stay-at-home mandates and conditions of the pandemic are reducing business, you are entitled to damages.
While he insurance companies denying service claim that the virus is not causing the loss of use or diminished value of property, applicable case law holds that the loss of use of property that has not been physically altered constitutes “physical loss or damage” for purposes of first-party property insurance. Unless stated otherwise directly in the signed policy, if business is interrupted by a physical force outside the business’s control, coverage is due.
Thankfully, our lawyers have taken up cases supporting companies that have been denied coverage and want their fair share in return.
Deal with your Banks Now
If you are falling behind or afraid you will be unable to make your mortgage payment or credit line payment, start by contacting your bank. Banks and lenders want to get paid and most will be willing to work with you. You will be in a much better position if you contact your lender before you are late or miss a payment. Even if you have missed payments, contacting and working out a deal to catch up is much better than just ignoring the problem.
There Are Also Protections from the State of New Jersey
Governor Phil Murphy in New Jersey has signed a bill that gave him the authority place a moratorium on evictions of homeowners amid foreclosure proceedings. He signed an executive order to “immediately suspend” such actions. The order would remain in effect for no longer than two months following the end of the state of emergency declared by Murphy. Be careful as Banks can still pursue foreclosures but would not be able to carry out a removal until the order is lifted.
Governor Murphy also urged “in the strongest possible terms” that lenders “do what they can for their mortgage customers to make loan repayment much more flexible in coming weeks and months.”
Foreclosures on mortgages through Fannie Mae or Freddie Mac are on hold for two months. Different states are imposing different rules in this area and you should check the State you live in to see what is available.
Utility bills and relief in light of Coronavirus
New Jersey’s major utility companies said they will keep on gas and electric services for customers who don’t pay their bills during the COVID-19 outbreak and shutdown. “In the interest of protecting public health, PSE&G is temporarily suspending shutoffs of electric or gas service to residential customers for non-payment,” PSE&G said in a statement.
On March 26th, President Donald Trump approved a disaster declaration bill for New Jersey. This allowed for federal funding and assistance for all areas impacted by the COVID-19 pandemic. This declaration allowed NJ to lift remaining bureaucratic barriers to assistance and enhance the State’s response to COVID-19. The Federal Emergency Management Agency could then provide direct support to the recovery efforts to COVID-19 in New Jersey.
There are already programs in place to help you. Check here to see qualifications for energy assistance programs in New Jersey.
Food Help for Coronavirus Victims
Food programs, such as NJ SNAP or New Jersey’s Supplemental Nutrition Assistance Program, are in place to help low-income families buy their groceries.
Families with children at home should remember that your local school district is providing meals to more than 500,000 students who qualify for free and reduced-costs meals. If you think your child now qualifies, learn how to apply here.
Food Pantries and banks across the state provide relief. The NJ State Legislature passed a bill to send $15 million to food banks in the state, including the Community Food Bank of New Jersey, the Food Bank of South Jersey and Fulfill of Monmouth and Ocean counties. There is a lot of information about various programs on food resources here.
Student Loan Payments Relief In Light of Coronavirus
Student Loan assistance is available for borrowers repaying loans through the New Jersey College Loans to Assist State Students (NJCLASS) program.
The New Jersey Higher Education Student Assistance Authority (HESAA) will offer assistance to those who need help making regular payments to NJCLASS student loans due to a diminished income. The HESAA website said those affected by COVID-19 can apply for NJCLASS loan relief for temporary disability or unemployment. Click these links for the applications for the unemployment relief options and temporary disability relief options. NJCLASS borrowers can apply for financial hardship relief. That application can be found here.
The U.S. Department of Education has suspended payments on federal loans while setting interest rates of these loans to zero during the national state of emergency.
Furthermore, on the Federal Level, Secretary Betsy DeVos directed all federal student loan servicers to give administrative forbearance to any federal loan borrower who requests one. The forbearance would be in effect for a period of at least 60 days, beginning on March 13, 2020. An automatic suspension of payments for any borrower exists who is more than 31 days delinquent or becomes more than 31 days delinquent as of March 13, 2020.
Business Interruption Insurance
If you have business interruption insurance, you may have a claim for your business being shut down. Many of these policies have exclusions for virus pandemics such as the COVID-19. A potential argument around this exclusion is that the government has forced a shut down in business.
The law interpreting virus exclusions is not fully developed, even now. Various arguments on how these laws can be interpreted have been advanced. COVID-19 has created a unique situation, which puts many businesses in unexplored terrain. The strongest arguments on these policies is the civil authority provisions which may provide coverage for losses suffered in connection with a governmental order prohibiting access to a covered location. Issues of what constitutes physical damage or loss will likely arise in this context. It is imperative that you check the specific terms and construction of your insurance policy, and how they operate in the specific context of your business's losses. New Jersey Assembly Bill 3844 and Statement (which you can read here) covers businesses with fewer than one hundred employees.
Our firm is keeping abreast with the law in all of these different areas in order to keep our clients fully informed. If you are disputing a covered loss with an insurance company, please give our firm a call. On any of these areas, our firm will provide a free remote consultation. We have video conferencing or a simple phone call to assist you. As the new laws and programs develop our firm will continue to update this blog.