The Small Business Reorganization Act of 2019 (SBRA) became effective on the eve of the economic free fall stemming from the COVID-19 pandemic. Longleaf Law Partner’s bankruptcy law expert, Cindy G. Oliver, explains the new law in our 13-part series, Bankruptcy Buzz.
Part 12 of 13:
A sometimes insurmountable hurdle for Chapter 11 debtors is the requirement that the Chapter 11 administrative claims must be paid in full by the effective date of the plan, as a prerequisite to plan confirmation. This requirement can render a bankruptcy estate administratively insolvent, with an unconfirmable plan. Subchapter V allows small business debtors to pay their bankruptcy administrative claims over time through the plan. As a result, unsecured creditors may receive dividends sooner. This is another feature of the Small Business Reorganization Act (SBRA), designed to increase a small business debtor’s chances of attaining a confirmed plan of reorganization.
The information provided in this article does not, and is not intended to, constitute legal advice. No action should be taken in any particular circumstance or fact situation with reliance upon the information contained in this article without obtaining the advice of an attorney.