Bankruptcy Law, Blog, Business
Small Business Reorganization Act (SBRA) of 2019 updates to Chapter 11
The Small Business Reorganization Act (SBRA) of 2019 added a new subchapter V to Chapter 11 of the Bankruptcy Code (11 U.S.C. §§ 1181-1195). It is applicable solely to “Small Business Debtors” who file a bankruptcy petition on or after February 19, 2020. For debtors who qualify, filing under the new subchapter is likely to be Quicker – statutory timelines are compressed. Cheaper – no UST fees, no committees, and shorter process Easier – can confirm without support from impaired classes and cram down certain secured claims. SBRA Qualification Who qualifies as a small business debtor under the statute? There are three requirements: First, 50 percent or more of the Debtor’s debt must have arisen from business or commercial activities (excluding single asset real estate businesses); Second, aggregate debts total $2,725,625 or less (that is, all non-contingent, liquidated, secured and unsecured debts together); Third, small business debtors must opt-in by checking a box on the voluntary petition form. SBRA Administration Administration of SBRA cases differs significantly from a traditional Chapter 11 case, blending concepts from current Chapter 12 and 13 cases. Primarily, in an SBRA case: the US Trustee must appoint a Standing Trustee in every case whose responsibility is to facilitate the small business debtor’s reorganization and oversee plan implementation over three to five years; within 45 days of the petition date, the small business debtor must file a report detailing its efforts to draft and implement a consensual plan of reorganization; within 60 days of the petition date, a mandatory status conference must be…
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