Lenders Take Notice - A New Bankruptcy Subchapter Goes Into Effect February 19, 2020 - Increased Filings ExpectedThe Small Business Reorganization Act (SBRA) goes into effect on February 19, 2020. The SBRA creates a new Subchapter V to Chapter 11, expanding access to bankruptcy relief for small businesses. With a debt ceiling of approximately $2.75 million, small business owners can take advantage of the new subchapter’s streamlined procedures and powerful tools to achieve an effective reorganization.
Key changes in the SBRA:
- Debtors have the exclusive right to propose a plan, in contrast to traditional Chapter 11’s provisions for a competing plan process.
- No Creditors’ Committees are appointed, reducing administrative costs.
- Company owners may retain their interest in the company without committing substantial new value or other assets to the plan.
- A plan may be confirmed even over objections by all creditors so long as all projected disposable income is committed to the plan payments for a period of three to five years, which is similar to the streamlined Chapter 13 requirements for individual debtors.
To learn more on this topic, please contact the Commercial Restructuring, Workouts & Asset Recovery Practice Group at Partridge Snow & Hahn.