News & Articles

What Commercial Lenders Need to Know About the Small Business Reorganization Act of 2019

Published on 1/17/2020

There is a tremendous buzz within the local bankruptcy bar about the Small Business Reorganization Act of 2019 (“SBRA”) that becomes effective February 19, 2020.  While the title of the Act purports to relate to small business, the Act may also be used by individual debtors engaged in commercial or business activity with related debt up to $2,725,625.

Lenders should be on alert because the SBRA specifically allows an individual debtor to modify certain loans secured by the debtor’s residential property.  These lenders should be cautious and become involved in a small business case as soon as they receive notice.  Under this new modification provision, debtors could seek to bifurcate claims, alter HELOCs, and remove deeds of trust that serve as additional collateral for business loans.  Most of the early analysis of SBRA pays short shrift to this modification mechanism.  Lenders that downplay this new section do so at their own peril. This new modification provision in § 1190 is a very real risk to certain loans secured by the personal residence of the Small Business debtor.

Having represented Commercial lenders for over 25 years, the attorneys in Ryan Swanson’s Banking Services, Creditors’ Rights & Bankruptcy practice group are prepared to address cases implicating these new, powerful sections of the Bankruptcy Code.  If you have any questions about this new modification provision feel free to contact the practice group team leader, Joe Sakay, 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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