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 1 of 13:
On August 23, 2019, the Small Business Reorganization Act of 2019 (SBRA) was signed into law and became effective on February 29, 2020. The SBRA created Subchapter V of Chapter 11 of the Bankruptcy Code, which is intended as a pathway for small business debtors to successfully reorganize through a more efficient and cost-effective process rather than the more expensive and cumbersome traditional Chapter 11. Subchapter V eliminates creditors’ committees and disclosure statements unless otherwise ordered by the court. It fast tracks the confirmation process, by requiring small business debtors to file a plan within 90 days. It empowers small business debtors by eliminating the absolute priority rule and allowing for modification of certain debts secured only by a debtor’s primary residence.
The SBRA is a long over-due opportunity for small businesses which otherwise cannot afford the hefty cost of a Chapter 11 reorganization, to successfully reorganize and hopefully avoid the need to convert to a Chapter 7 liquidation case. But who could have anticipated the dire need for bankruptcy relief designed specifically for small businesses at the time the SBRA became effective in February 2020? The SBRA is new and just beginning its maiden voyage. Creditors are advised to not make this journey alone. It is best to have a seasoned bankruptcy attorney lead you and help you protect your interest, and Longleaf Law Partners has the experience creditors need. Subsequent posts will examine more closely some of the unique features of the new SBRA.
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.