The Small Business Reorganization Act of 2019 (the "SBRA"), enacting new subchapter V of Chapter 11 of the U.S. Bankruptcy Code, became effective February 19, 2020. The SBRA makes it significantly easier for many small businesses to reorganize under Chapter 11 of the Bankruptcy Code by reducing costs, streamlining certain disclosure and filing requirements, reducing or eliminating certain stringent plan confirmation requirements, such as the "absolute priority rule," and speeding up the plan confirmation process. In response to the economic hardships many small business owners now endure as a result of the COVID-19 pandemic, and the expected rise in Chapter 11 bankruptcy filings, the CARES Act legislation enacted on March 27, 2020 expanded the eligibility requirements of subchapter V to make the SBRA available to a greater number of small businesses.
Specifically, the CARES Act legislation amends Section 101(51D) of the Bankruptcy Code to:
temporarily raise the debt ceiling amounts from $2,725,625 to $7,500,000 for new subchapter V cases filed between March 28, 2020, and March 27, 2021; and
permanently removes the eligibility for any affiliate of a public company to file for subchapter V relief under Chapter 11.
This article is meant for informational purposes only. It does not constitute legal advice and the reading of it does not create an attorney-client relationship between the author and the reader. All readers are encouraged to speak to a licensed bankruptcy attorney in the state they reside in for legal advice specific to his/her unique circumstances.