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 10 of 13:
In a traditional Chapter 11 case, the debtor must solicit the acceptance of the plan by at least one impaired class of claims as a prerequisite to confirmation. Under the new Subchapter V of Chapter 11, the court may confirm a small business debtor’s plan, regardless of acceptance by unsecured creditors, if the plan does not discriminate unfairly, and is fair and equitable with respect to each impaired class of claims. In order to satisfy the fair and equitable standard, the plan must provide that all of the debtor’s projected disposable income to be received over three years (or as may extended, up to five years) will be applied to plan payments. This empowers a small business debtor to propose a non-consensual confirmable plan, overcoming creditors’ attempts to block confirmation by rejecting the plan.
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.