On August 23, 2019, the Small Business Reorganization Act of 2019 (SBRA) became law with an effective date of February 19, 2020. Congress enacted the SBRA in order to allow small businesses to reorganize under chapter 11 of the bankruptcy code in a more time-efficient and less costly manner than the traditional chapter 11 bankruptcy case. In order to be eligible under the SBRA, the small business must have debt of less than $2,725,625. This debt limit has been temporarily increased to $7,500,000 pursuant to the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) on March 27, 2020. The debt limit will return to $2,725,625 after one year, unless extended by Congress.
The American Bankruptcy Institute (ABI) publishes statistics on the number of cases filed under the SBRA. ABI reported the number of cases as follows:
The CARES Act also provided small businesses the opportunity to apply for funds through the Small Business Administration, under the Paycheck Protection Plan (PPP). The PPP loans were intended to provide forgivable loans to businesses to guarantee a specified number of weeks of payroll and other costs to allow those businesses to continue to operate. As we proceed through these unprecedented times dealing with the pandemic, we expect the small business filings under the SBRA to escalate as the PPP monies are expended and as we head towards the expiration of the increased debt limit that is set to expire in March 2021.
For more information on the SBRA and how a filing may affect your organization, please feel free to contact the bankruptcy group at Weltman, Weinberg & Reis, Co. LPA.
For more comprehensive information and insights, watch our Ask a Pro: Navigating Chapters 11 & 12 Bankruptcies webinar.
This blog is not a solicitation for business and it is not intended to constitute legal advice on specific matters, create an attorney-client relationship or be legally binding in any way.
