News & Articles

New Small Business Reorganization Act to Provide Powerful Tools for Small Business Debtors

Published on 1/14/2020

Next month, small businesses and struggling entrepreneurs will have a new way to seek bankruptcy protection.  Last summer, Congress passed the Small Business Reorganization Act of 2019 (“SBRA”), which has been codified as Subchapter V of the Bankruptcy Code.  This Act provides a streamlined Chapter 11 process for persons or entities engaged in business activity with total debt of $2,725,625 or less. The Act provides powerful tools allowing small business debtors the opportunity to reorganize. These tools include, among others, an enhanced cramdown provision and streamlined confirmation procedures. For these reasons, anecdotal evidence suggests many qualifying entities are holding back on filing their bankruptcy petitions until after the February 19, 2020, effective date of the Act.  Consequently, bankruptcy attorneys expect an uptick in Chapter 11 filings going into next quarter.

Given the importance of the SBRA reorganization provisions, they almost overshadow one other critical change: enhanced due diligence requirements for preference actions.  Combined with a new $25,000 minimum, we can expect to see a limit to the sheer volume of preference cases.

Ryan Swanson’s bankruptcy attorneys have over 40 years’ experience handling cases under Chapter 11 of the Bankruptcy Code and are prepared for the nuances of its new Subchapter V.  If you have questions about the new Act, feel free to contact Joe Sakay, Chair of Ryan Swanson’s Banking Services, Creditors’ Rights & Bankruptcy practice group at 206.654.2242 or [email protected].

This message has been released by the Banking Services, Creditors’ Rights & Bankruptcy group at Ryan, Swanson & Cleveland, PLLC to advise of recent developments in the law. Because each situation is different, this information is intended for general information purposes only and is not intended to provide legal advice on any specific facts and circumstances. Ryan, Swanson & Cleveland, PLLC is a full-service law firm located in Seattle, Washington.

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