Are you a small business that has been impacted by COVID-19
business interruption? Worried about making it through the month, year? There
is help. The Small Business Reorganization Act of 2019 was approved in August
and went into effective February of 2020. It added a subchapter to Chapter 11
bankruptcy rules designed to address stumbling blocks for small businesses
trying to reorganize and stay viable. The CARES Act made a temporary
modification to the eligibility.
Here are the highlights in our continuing series on COVID-19
- Business or individual engaged in a business activity with 50% or more business debt.
- Debt limit $7,250,000 until March 26, 2021 then it will go down to the original $2,725,625. This is the CARES Act modification.
- Excluded are single asset real estate businesses, a business that is part of a holding company where the combined debt of company exceeds the threshold, and public companies.
- Retroactive applications if you are already in Chapter 11 and meet the criteria, you may amend the petition.
What does it do:
- Allows existing management to stay in control.
- Appoints a trustee with limited authority immediately:
- Does not run the business.
- Helps to create a business plan for reorganization
- Reviews claims and discharge.
- Attends various meetings: status, valuation, plan confirmation.
- Paid a percentage of distribution.
- Eliminates the creditor committee.
- Mandatory status conference within 60 days of filing.
- At time of petition filing must provide financial statements.
- Within 30 days of filing must provide Schedules and Statement of Financial Affairs.
- Within 14 days of status conference file efforts of consensual plan.
- Monthly reports are required.
- No trustee fees.
- Provides an expedited process for reorganization.
- Reduces costs associated with traditional
Chapter 11 bankruptcy.
- Provides businesses leverage to negotiate with
If you would like more information about this option, please
call the office to schedule an appointment.