Date of Award
Legal Research Pathfinders
The Small Business Reorganization Act of 2019 (SBRA) went into effect on February 19, 2020 to provide small businesses bankruptcy relief that was previously untenable under a traditional chapter 11 reorganization. The SBRA created subchapter V of chapter 11, codified as 11 U.S.C. §§ 1181 – 1195, that is available for small business debtors with debts less than $2,725,625. The debt limit has been temporarily increased to $7,500,000 until March 26, 2021 by the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act).
The timing of the new law could not have been better considering how small businesses have been effected by the COVID-19 pandemic in 2020. The subchapter V process streamlines bankruptcy reorganization and rehabilitation in a quick and cost-effective manner that allows debtors to remain in business. Many small businesses will now have the chance to survive when previously their only option was a cost prohibitive traditional chapter 11 bankruptcy that often resulted in dismissal or a conversion to chapter 7 liquidation. Webinar: Small Business Reorganization Act of 2019/Subchapter V (Midwestern Virtual Bankruptcy Institute 2020).
The three principal features of subchapter V are “(1) requiring the appointment of an individual to serve as the trustee in a chapter 11 case filed by a small business debtor, who would perform many of the same duties required of a chapter 12 trustee; (2) requiring such private trustee to monitor the debtor’s progress toward confirmation of a reorganization plan; and (3) authorizing the court to confirm a plan 2 over the objection of the debtor’s creditors, providing such plan does not discriminate unfairly, and is fair and equitable, with respect to each class of claims or interests that is impaired under, and has not accepted, the plan.” H.R. REP. NO. 116-171, at 4 (2019).
Snyder, Seth, "Subchapter V: A Product of the Small Business Reorganization Act of 2019" (2020). Student Works. 7.